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Intergovernmental Transfers and Municipal Finance in Colombia

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  • Juan Camilo Chaparro

    (Fedesarrollo)

  • Michael Smart

    ()
    (University of Toronto)

  • Juan Gonzola Zapata

    (Fedesarrollo)

Abstract

For the past fifteen years, Colombia has been engaged in a grand experiment in decentralization. Since 1986, subnational government spending has increased dramatically, as the regions have assumed greater control of health and education programs and other local services, and an increasing fraction of national revenues have been earmarked for transfer to lower-level governments. This paper examines fiscal data for a large number of Colombian municipalities for the 1985-99 period. Our first goal is to describe the effects of the transfer system on horizontal balance among municipalities. By our estimates, the fiscal capacities of Colombian municipalities differ substantially, which is a major challenge to designing an effective system of decentralization. Our second goal is to draw some inferences from the data about how the current system of transfers has affected the level of local taxation and spending, and the pattern of spending across functional categories. Our data cover a period that straddles the major reform in the allocation of municipal transfers that resulted from Law 60 in 1993. This permits a more accurate assessment of the effects of transfers than has been possible in previous research.

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Bibliographic Info

Paper provided by International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto in its series International Tax Program Papers with number 0403.

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Length: 40 Pages
Date of creation: Mar 2004
Date of revision:
Handle: RePEc:ttp:itpwps:0403

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Keywords: Columbia; decentralization; subnational taxes; local taxation;

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References

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  1. Juan Jose Echavarria & Carolina Renteria & Roberto Steiner, 2002. "Decentralization and Bailouts in Colombia," Research Department Publications 3138, Inter-American Development Bank, Research Department.
  2. James R. Hines & Richard H. Thaler, 1995. "The Flypaper Effect," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 217-226, Fall.
  3. Anwar Shah, 1996. "A Fiscal Need Approach to Equalization," Canadian Public Policy, University of Toronto Press, vol. 22(2), pages 99-115, June.
  4. Bird, Richard M. & Smart, Michael, 2002. "Intergovernmental Fiscal Transfers: International Lessons for Developing Countries," World Development, Elsevier, vol. 30(6), pages 899-912, June.
  5. Dillinger, William & Webb, Steven B., 1999. "Decentralization and fiscal management in Colombia," Policy Research Working Paper Series 2122, The World Bank.
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Cited by:
  1. Joaquín Mauricio Zuleta Arango & Lisandro López Marín & Daniel Sánchez García, 2010. "Descentralización Y Disparidades Económicas Territoriales En Colombia (1990-2005)," Observatorio de la Economía Latinoamericana, Grupo Eumed.net (Universidad de Málaga), issue 130, April.
  2. Juan David Barón Rivera & Adolfo Meisel Roca, 2003. "La descentralización y las disparidades económicas regionales en Colombia en la década de 1990," DOCUMENTOS DE TRABAJO SOBRE ECONOMÍA REGIONAL 002975, BANCO DE LA REPÚBLICA - ECONOMÍA REGIONAL.
  3. World Bank & European Commission & Food and Agriculture Organization & United Nations Children’s Fund & United Nations Development Program & World Health Organization, 2007. "Angola : Public Expenditure Review, Volume 2. Sectoral Review," World Bank Other Operational Studies 7648, The World Bank.
  4. World Bank, 2009. "Colombia - Decentralization : Options and Incentives for Efficiency - Main Report," World Bank Other Operational Studies 3096, The World Bank.
  5. Bernardi, Luigi & Fumagalli, Elena & Fumagalli, Laura, 2007. "Tax Systems and tax reforms in Latin America, Part I : country studies, Colombia," MPRA Paper 5224, University Library of Munich, Germany.
  6. Gustavo Adolfo García Cruz, 2008. "Informalidad Regional En Colombia," DOCUMENTOS DE TRABAJO-CIDSE 004608, UNIVERSIDAD DEL VALLE - CIDSE.
  7. Mauricio Olivera & Felipe Barrera, 2007. "La sociedad gana o pierde como resultado de la privatizacion? El caso de Colombia," Research Department Publications 3231, Inter-American Development Bank, Research Department.
  8. Jaime Bonet, 2004. "Descentralización fiscal y disparidades en el ingreso regional: la experiencia colombiana," DOCUMENTOS DE TRABAJO SOBRE ECONOMÍA REGIONAL 002282, BANCO DE LA REPÚBLICA - ECONOMÍA REGIONAL.
  9. Felipe Barrera-Osorio & Mauricio Olivera & Carlos Ospino, 2009. "Does Society Win or Lose as a Result of Privatization? The Case of Water Sector Privatization in Colombia," Economica, London School of Economics and Political Science, vol. 76(304), pages 649-674, October.
  10. Roy Bahl & Musharraf Cyan, 2009. "Local Government Taxation in Pakistan," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0909, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  11. Marta Ferreira Dias & Ricardo Silva, 2004. "Central Government Transfers and Regional Convergence in Portugal," ERSA conference papers ersa04p443, European Regional Science Association.
  12. Gerardo Villa, 2005. "Reseña sobre el ajuste fiscal territorial después de la Constitución de 1991," INVESTIGACIONES SOBRE ECONOMÍA REGIONAL - CREE 003458, BANCO DE LA REPÚBLICA - ECONOMÍA REGIONAL.
  13. Taimur Samad & Nancy Lozano-Gracia & Alexandra Panman, 2012. "Colombia Urbanization Review : Amplifying the Gains from the Urban Transition," World Bank Publications, The World Bank, number 11955, October.
  14. World Bank, 2009. "Colombia - Decentralization : Options and Incentives for Efficiency - Sector Annexes," World Bank Other Operational Studies 3097, The World Bank.
  15. Jaime Bonet, 2006. "Desequilibrios regionales en la política de descentralización en Colombia," DOCUMENTOS DE TRABAJO SOBRE ECONOMÍA REGIONAL 002293, BANCO DE LA REPÚBLICA - ECONOMÍA REGIONAL.
  16. Jaime Bonet, 2006. "Fiscal decentralization and regional income disparities: evidence from the Colombian experience," The Annals of Regional Science, Springer, vol. 40(3), pages 661-676, August.

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