IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/76983.html
   My bibliography  Save this paper

Intergovernmental transfers and regional income inequalities in Uruguay

Author

Listed:
  • Muinelo-Gallo, Leonel
  • Rodriguez-Miranda, Adrián
  • Castro-Scavone, Pablo

Abstract

In this paper we explore the bidirectional relationship between intergovernmental transfers and regional income inequalities in Uruguay. Based on the construction of a simultaneous equations model, that accounts for the joint determination of these two variables, and by using a panel of departments (regions) over the period 1990-2012, our empirical results show that the central government transfers to regional governments does not have a significant impact on regional income inequalities levels. In fact, these transfers are strongly determined by the historical validation of public expenditure executed by regional governments but not by regional income disparities levels. Our results are consistent with the lack of territorial cohesion criteria in the normative governing the allocation of these transfers in Uruguay. Finally, these results have clear policy implications based on the necessary revision of the normative scheme of intergovernmental regional transfers in Uruguay if the objective is to arrive to a country with a higher degree of territorial cohesion.

Suggested Citation

  • Muinelo-Gallo, Leonel & Rodriguez-Miranda, Adrián & Castro-Scavone, Pablo, 2017. "Intergovernmental transfers and regional income inequalities in Uruguay," MPRA Paper 76983, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:76983
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/76983/1/MPRA_paper_76983.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Assar Lindbeck & Jörgen Weibull, 1987. "Balanced-budget redistribution as the outcome of political competition," Public Choice, Springer, vol. 52(3), pages 273-297, January.
    2. Solé-Ollé, Albert & Sorribas-Navarro, Pilar, 2008. "The effects of partisan alignment on the allocation of intergovernmental transfers. Differences-in-differences estimates for Spain," Journal of Public Economics, Elsevier, vol. 92(12), pages 2302-2319, December.
    3. Alberto Porto & Pablo Sanguinetti, 2001. "Political Determinants of Intergovernmental Grants: Evidence From Argentina," Economics and Politics, Wiley Blackwell, vol. 13(3), pages 237-256, November.
    4. Worthington, Andrew C & Dollery, Brian E, 1998. "The Political Determination of Intergovernmental Grants in Australia," Public Choice, Springer, vol. 94(3-4), pages 299-315, March.
    5. Jameson Boex & Jorge Martinez-Vazquez, 2005. "The Determinants of the Incidence of Intergovernmental Grants: A Survey of the International Experience (2005)," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0509, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    6. B. Dahlby & L. S. Wilson, 1994. "Fiscal Capacity, Tax Effort, and Optimal Equalization Grants," Canadian Journal of Economics, Canadian Economics Association, vol. 27(3), pages 657-672, August.
    7. Acemoglu, Daron & Johnson, Simon & Robinson, James A., 2005. "Institutions as a Fundamental Cause of Long-Run Growth," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 6, pages 385-472, Elsevier.
    8. Yingyi Qian & Barry R. Weingast, 1997. "Federalism as a Commitment to Reserving Market Incentives," Journal of Economic Perspectives, American Economic Association, vol. 11(4), pages 83-92, Fall.
    9. -, 2012. "Decentralization and reform in Latin America: improving intergovernmental relations," Copublicaciones, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 2028 edited by Edward Elgar.
    10. Andreas P. Kyriacou & Leonel Muinelo-Gallo & Oriol Roca-Sagalés, 2015. "Fiscal decentralization and regional disparities: The importance of good governance," Papers in Regional Science, Wiley Blackwell, vol. 94(1), pages 89-107, March.
    11. David Betson & Robert Haveman, 1984. "The Role of Income Transfers in Reducing Inequality between and within Regions," NBER Chapters, in: Economic Transfers in the United States, pages 283-326, National Bureau of Economic Research, Inc.
    12. Cowell, F.A., 2000. "Measurement of inequality," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 2, pages 87-166, Elsevier.
    13. Guido Tabellini, 2010. "Culture and Institutions: Economic Development in the Regions of Europe," Journal of the European Economic Association, European Economic Association, vol. 8(4), pages 677-716, June.
    14. Keen, Michael & Marchand, Maurice, 1997. "Fiscal competition and the pattern of public spending," Journal of Public Economics, Elsevier, vol. 66(1), pages 33-53, October.
    15. Dilip Mookherjee & Pranab K. Bardhan, 2000. "Capture and Governance at Local and National Levels," American Economic Review, American Economic Association, vol. 90(2), pages 135-139, May.
    16. Salmon, Pierre, 1987. "Decentralisation as an Incentive Scheme," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 3(2), pages 24-43, Summer.
    17. James Alm & Jorge Martinez-Vazquez *, 2015. "Re-designing equalization transfers: an application to South Africa provincial equitable share," Journal of Developing Areas, Tennessee State University, College of Business, vol. 49(1), pages 1-22, January-M.
    18. Badi H. Baltagi, 2021. "Simultaneous Equations with Error Components," Springer Texts in Business and Economics, in: Econometric Analysis of Panel Data, edition 6, chapter 0, pages 157-186, Springer.
    19. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, June.
    20. Christian Lessmann, 2009. "Fiscal Decentralization and Regional Disparity: Evidence from Cross-Section and Panel Data," Environment and Planning A, , vol. 41(10), pages 2455-2473, October.
    21. Brennan,Geoffrey & Buchanan,James M., 2006. "The Power to Tax," Cambridge Books, Cambridge University Press, number 9780521027922.
    22. Wallace E. Oates & Wallace E. Oates, 2004. "An Essay on Fiscal Federalism," Chapters, in: Environmental Policy and Fiscal Federalism, chapter 22, pages 384-414, Edward Elgar Publishing.
    23. Marta Curto-Grau (Universitat de Barcelona) & Albert Sole-Olle (Universitat de Barcelona) & Pilar Sorribas-Navarro(Universitat de Barcelona), 2012. "Partisan targeting of inter-governmental transfers & state interference in local elections: evidence from Spain," Working Papers in Economics 288, Universitat de Barcelona. Espai de Recerca en Economia.
    24. Pranab Bardhan, 2002. "Decentralization of Governance and Development," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 185-205, Fall.
    25. Khemani, Stuti, 2003. "Partisan politics and intergovernmental transfers in India," Policy Research Working Paper Series 3016, The World Bank.
    26. Avery, Robert B, 1977. "Error Components and Seemingly Unrelated Regressions," Econometrica, Econometric Society, vol. 45(1), pages 199-209, January.
    27. Roy Bahl, 1999. "Implementation Rules For Fiscal Decentralization," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper9901, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    28. Wallace E. Oates & Wallace E. Oates, 2004. "Fiscal Decentralization and Economic Development," Chapters, in: Environmental Policy and Fiscal Federalism, chapter 21, pages 377-383, Edward Elgar Publishing.
    29. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, December.
    30. Grossman, Philip J, 1994. "A Political Theory of Intergovernmental Grants," Public Choice, Springer, vol. 78(3-4), pages 295-303, March.
    31. Roberto Ezcurra & Pedro Pascual, 2008. "Fiscal Decentralization and Regional Disparities: Evidence from Several European Union Countries," Environment and Planning A, , vol. 40(5), pages 1185-1201, May.
    32. Dixit, Avinash & Londregan, John, 1998. "Fiscal federalism and redistributive politics," Journal of Public Economics, Elsevier, vol. 68(2), pages 153-180, May.
    33. Christian Lessmann, 2012. "Regional inequality and decentralization: an empirical analysis," Environment and Planning A, Pion Ltd, London, vol. 44(6), pages 1363-1388, June.
    34. Matyas,Laszlo (ed.), 1999. "Generalized Method of Moments Estimation," Cambridge Books, Cambridge University Press, number 9780521669672.
    35. Brollo, Fernanda & Nannicini, Tommaso, 2012. "Tying Your Enemy's Hands in Close Races: The Politics of Federal Transfers in Brazil," American Political Science Review, Cambridge University Press, vol. 106(4), pages 742-761, November.
    36. A. Colin Cameron & Pravin K. Trivedi, 2010. "Microeconometrics Using Stata, Revised Edition," Stata Press books, StataCorp LP, number musr, March.
    37. Agnese Sacchi & Simone Salotti, 2014. "How Regional Inequality Affects Fiscal Decentralisation: Accounting for the Autonomy of Subcentral Governments," Environment and Planning C, , vol. 32(1), pages 144-162, February.
    38. Jameson Boex, 2003. "The incidence of local government allocations in Tanzania," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0311, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    39. Oates, Wallace E., 1993. "Fiscal Decentralization and Economic Development," National Tax Journal, National Tax Association, vol. 46(2), pages 237-43, June.
    40. James Alm & Jameson Boex, 2002. "An Overview of Intergovernmental Fiscal Relations and Subnational Public Finance in Nigeria," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0201, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    41. Roberto Ezcurra & Andrés Rodríguez-Pose, 2014. "Government Quality and Spatial Inequality: A Cross-Country Analysis," Environment and Planning A, , vol. 46(7), pages 1732-1753, July.
    42. Weingast, Barry R, 1995. "The Economic Role of Political Institutions: Market-Preserving Federalism and Economic Development," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 11(1), pages 1-31, April.
    43. Barro, Robert J, 2000. "Inequality and Growth in a Panel of Countries," Journal of Economic Growth, Springer, vol. 5(1), pages 5-32, March.
    44. Jorge Martinez-Vazquez & Cristian Sepúlveda, 2011. "Intergovernmental Transfers in Latin America: A Policy Reform Perspective," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1108, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    45. Leonel Muinelo-Gallo & Adrián Rodríguez, 2014. "Descentralización fiscal, calidad de gestión de gobierno y disparidades regionales en Uruguay," Estudios de Economia, University of Chile, Department of Economics, vol. 41(2 Year 20), pages 219-250, December.
    46. Atlas, Cary M, et al, 1995. "Slicing the Federal Government Net Spending Pie: Who Wins, Who Loses, and Why," American Economic Review, American Economic Association, vol. 85(3), pages 624-629, June.
    47. Matyas,Laszlo (ed.), 1999. "Generalized Method of Moments Estimation," Cambridge Books, Cambridge University Press, number 9780521660136.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Leonel Muinelo-Gallo & Adrián Rodríguez-Miranda & Pablo Castro-Scavone, 2016. "Intergovernmental Transfers and Regional Income Inequalities: An Empirical Analysis of Uruguay," Hacienda Pública Española / Review of Public Economics, IEF, vol. 219(4), pages 9-34, December.
    2. Nupur Nirola & Sohini Sahu & Atrayee Choudhury, 2022. "Fiscal decentralization, regional disparity, and the role of corruption," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 68(3), pages 757-787, June.
    3. Andreas P. Kyriacou & Leonel Muinelo-Gallo & Oriol Roca-Sagalés, 2015. "Regional inequalities, fiscal decentralization and government quality: empirical evidence from simultaneous equations," Working Papers. Collection A: Public economics, governance and decentralization 1501, Universidade de Vigo, GEN - Governance and Economics research Network.
    4. Andreas P. Kyriacou & Leonel Muinelo-Gallo & Oriol Roca-Sagalés, 2015. "Fiscal decentralization and regional disparities: The importance of good governance," Papers in Regional Science, Wiley Blackwell, vol. 94(1), pages 89-107, March.
    5. Reingewertz, Yaniv, 2014. "Fiscal Decentralization - a Survey of the Empirical Literature," MPRA Paper 59889, University Library of Munich, Germany.
    6. Tristan Canare & Jamil Paolo Francisco & Rose Ann Camille Caliso, 2020. "Decentralization and Income Inequality in a Panel and Cross‐Section of Countries," Journal of International Development, John Wiley & Sons, Ltd., vol. 32(4), pages 543-579, May.
    7. Maria EL KHDARI, 2015. "Déterminants des transferts intergouvernementaux : le cas des communes Marocaines," Working Papers 201531, CERDI.
    8. Emilie Caldeira, 2012. "Does the System of Allocation of Intergovernmental Transfers in Senegal Eliminate Politically Motivated Targeting?," Journal of African Economies, Centre for the Study of African Economies, vol. 21(2), pages 167-191, March.
    9. Jorge Martinez-Vazquez & Santiago Lago-Peñas & Agnese Sacchi, 2017. "The Impact Of Fiscal Decentralization: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 31(4), pages 1095-1129, September.
    10. Łukasz Piętak, 2022. "Regional disparities, transmission channels and country's economic growth," Journal of Regional Science, Wiley Blackwell, vol. 62(1), pages 270-306, January.
    11. Josip Glaurdić & Vuk Vuković, 2017. "Granting votes: exposing the political bias of intergovernmental grants using the within-between specification for panel data," Public Choice, Springer, vol. 171(1), pages 223-241, April.
    12. Tristan Canare, 2022. "Decentralization and welfare: Evidence from a panel of countries," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 93(3), pages 767-796, September.
    13. Martinez-Vazquez, Jorge & McNab, Robert M., 2003. "Fiscal Decentralization and Economic Growth," World Development, Elsevier, vol. 31(9), pages 1597-1616, September.
    14. Lars P. Feld & Horst Zimmermann & Thomas Döring, 2003. "Föderalismus, Dezentralität und Wirtschaftswachstum," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 72(3), pages 361-377.
    15. Lars P. Feld & Horst Zimmermann & Thomas Döring, 2004. "Federalism, Decentralization, and Economic Growth," Marburg Working Papers on Economics 200430, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    16. Kyriacou, Andreas & Morral-Palacín, Noemí, 2015. "Secessionism and the Quality of Government: Evidence from a Sample of OECD Countries," MPRA Paper 116307, University Library of Munich, Germany.
    17. Christian Lessmann, 2012. "Regional Inequality and Decentralization: An Empirical Analysis," Environment and Planning A, , vol. 44(6), pages 1363-1388, June.
    18. Padovano, Fabio, 2012. "The drivers of interregional policy choices: Evidence from Italy," European Journal of Political Economy, Elsevier, vol. 28(3), pages 324-340.
    19. Andreas Kyriacou & Oriol Roca sagalés, 2009. "Fiscal descentralization and the quality of government: evidence from panel data," Hacienda Pública Española / Review of Public Economics, IEF, vol. 189(2), pages 131-155, June.
    20. Thushyanthan Baskaran & Lars P. Feld & Jan Schnellenbach, 2014. "Fiscal Federalism, Decentralization and Economic Growth: Survey and Meta-Analysis," CESifo Working Paper Series 4985, CESifo.

    More about this item

    Keywords

    intergovernmental transfers; regional inequalities; panel data; simultaneous equations; Uruguay;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:76983. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.