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How do subnational governments react to shocks to different revenue sources? Evidence from hydrocarbon-producing provinces in Argentina

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  • Besfamille, Martín
  • Jorrat, Diego A.
  • Manzano, Osmel
  • Quiroga, Bernardo F.
  • Sanguinetti, Pablo

Abstract

Based on the fiscal regime that prevailed in Argentina from 1988 to 2003, we estimate the effects of changes in intergovernmental transfers and hydrocarbon royalties on provincial public consumption and debt. Whenever intergovernmental transfers increase, all provinces primarily increase public consumption and, to a lesser extent, decrease their debt. However, when hydrocarbon-producing provinces experienced an increase in royalties, they saved the entire increase. We provide evidence that the exhaustible nature of royalties may explain this saving reaction in hydrocarbon-producing provinces.

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  • Besfamille, Martín & Jorrat, Diego A. & Manzano, Osmel & Quiroga, Bernardo F. & Sanguinetti, Pablo, 2023. "How do subnational governments react to shocks to different revenue sources? Evidence from hydrocarbon-producing provinces in Argentina," Journal of Urban Economics, Elsevier, vol. 136(C).
    • Handle: RePEc:eee:juecon:v:136:y:2023:i:c:s009411902300027x
    DOI: 10.1016/j.jue.2023.103558
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    Cited by:

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    2. Jorge Puig & Alberto Porto, 2022. "On the fiscal behavior of subnational governments. A long-term vision for Argentina," Asociación Argentina de Economía Política: Working Papers 4588, Asociación Argentina de Economía Política.

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    More about this item

    Keywords

    Intergovernmental transfers; Non-renewable resources; Hydrocarbon royalties; Provincial public consumption and debt; Argentina; Bartik instruments;
    All these keywords.

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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