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Oil windfalls and X-inefficiency: evidence from Brazil

Author

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  • Fernando Antonio Slaibe Postali

Abstract

Purpose - The purpose of this paper is to investigate whether Brazilian municipalities are losing efficiency when collecting local taxes in response to oil windfalls. In particular, the paper aims to analyze the hypothesis that these grants encourage the benefiting municipalities to collect taxes with excessive administrative costs. Design/methodology/approach - The author estimate a stochastic cost frontier with fixed effects and investigate whether oil revenues impact on the efficiency scores. Findings - The results reveal that the municipalities benefitting from oil revenues (royalties) reduce their efficiency in collecting taxes in response to such grants, which signals that they generate some type of X-inefficiency in municipal public management. Research limitations/implications - The stochastic cost frontier requires the calculation of input prices for public sector. Originality/value - Using a cost frontier, it is possible to avoid the problem of mixing technical efficiency with unobservable preferences on public goods, as well as to focus on economic efficiency instead of technical one.

Suggested Citation

  • Fernando Antonio Slaibe Postali, 2016. "Oil windfalls and X-inefficiency: evidence from Brazil," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 43(5), pages 699-718, October.
    • Handle: RePEc:eme:jespps:v:43:y:2016:i:5:p:699-718
    DOI: 10.1108/JES-02-2014-0036
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    More about this item

    Keywords

    Public sector; Economic efficiency; Oil windfalls; Stochastic cost frontier; H21; H71; Q33; C19;
    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
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • C19 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Other

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