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Tax effort and oil royalties in the Brazilian municipalities

Author

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  • Fernando Antonio Slaibe Postali

    (University of Sao Paulo, Department of Economics, Sao Paulo, SP 05508-010, Brazil)

Abstract

This paper estimates a stochastic production frontier, to investigate whether municipalities covered by oil royalties in the last decade have reduced their tax effort in Brazil. The issue is relevant to the prospect of a substantial increase in these revenues and the new rules for distribution of the funds, established by Law No. 12.734/2012. The inputs were provided by personnel and capital expenditures, whereas the product was defined as the municipal tax collection. With the purpose of overcoming the endogeneity problems due to reverse causality of output on inputs, we used the lagged independent variable as instruments in the inefficiency equation. The data set is composed of a panel of Brazilian municipalities from 2002 to 2011. The results indicate that oil revenues have a negative impact on the estimated efficiencies, signaling reduced fiscal effort by the benefiting municipalities

Suggested Citation

  • Fernando Antonio Slaibe Postali, 2015. "Tax effort and oil royalties in the Brazilian municipalities," Economia, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 16(3), pages 395-405.
    • Handle: RePEc:anp:econom:v:16:y:2015:3:395_405
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    More about this item

    Keywords

    Oil windfalls; Stochastic frontier analysis; Tax effort; Municipalities; Endogeneity;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)

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