Institutional Design and Implicit Incentives in Bolivia's Decentralization Model
The second generation fiscal federalism (sGff) approach is used as a reference to analyze the political and fiscal institutional design of Bolivia’s decentralization model and its evolution. subnational public finance data up to 2008 is used to verify that decentralization of expenditure was higher than that of revenue, establishing a context of vertical fiscal imbalance that increased due to growing fiscal transfers during the positive external shock (boom) period. consequently, the subnational fiscal surplus was not a result of internal efficiency but of excess revenues from such transfers. Panel models were estimated to identify and assess the implicit incentives embedded in fiscal institutions of the decentralization model. findings at the municipal level are: i) misalignment of local spending with local interests due to dominance of transfers over own revenue (dominance of central government development policies); ii) incentive to spend transfers faster than own revenue (flypaper effect); iii) greater marginal contribution of own revenue to positive fiscal balances compared to transfers, thus introducing the seed for a soft budget constraint but hidden by the fiscal surplus; iv) disincentive to generate own revenue (tax and non-tax) due to the size and growth of transfers (disincentive to the culture of contributing to own revenue). findings at the prefecturall level are: i) misalignment with regional interests given the dominance of transfers over own revenue due to absolute lack of tax powers (until 2009); ii) high tendency to a soft budget constraint and, eventually, also fiscal bail-out, hidden by the fiscal surplus; iii) in only two departments collection of national-level taxes were higher, compared to transfers received in the same departments; iv) disincentive to pay the VAt (national-level tax) due to higher royalty transfers received, an effect not extended to other national-level taxes; v) high dependence from hydrocarbon-based transfers, and fiscal risk when this natural resource declines (both in volume and prices) due to volatility of international oil prices. Also, as a result of the decentralization model a positive and significant impact was found on education-coverage indicators, an important development objective of the national government.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Volume (Year): (2013)
Issue (Month): 19 (Mayo)
|Contact details of provider:|| Postal: Universidad católica Boliviana San Pablo, Instituto de Investigaciones Socio Económicas, Av. 14 de septiembre 4807. Obrajes, La Paz, Bolivia|
Phone: (591-2) 784159
Fax: (591-2) 786707
Web page: http://www.iisec.ucb.edu.bo
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ajwad, Mohamed Ihsan & Wodon, Quentin, 2007. "Do local Governments maximize access rates to public services across areas?: A test based on marginal benefit incidence analysis," The Quarterly Review of Economics and Finance, Elsevier, vol. 47(2), pages 242-260, May.
- Francois Bourguignon, 2004. "The Poverty-growth-inequality triangle," Indian Council for Research on International Economic Relations, New Delhi Working Papers 125, Indian Council for Research on International Economic Relations, New Delhi, India.
- Gustavo Canavire-Bacarreza & Jorge Martinez-Vazquez & Cristian Sepúlveda, 2012.
"Sub-national Revenue Mobilization in Peru,"
International Center for Public Policy Working Paper Series, at AYSPS, GSU
paper1209, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
- Gustavo Canavire-Bacarreza & Jorge Martínez-Vázquez & Cristián Sepúlveda, 2012. "Sub-national Revenue Mobilization in Peru," IDB Publications (Working Papers) 65358, Inter-American Development Bank.
- Gustavo Canavire-Bacarreza & Jorge Martinez-Vazquez & Cristian Sepulveda, 2012. "Sub-national Revenue Mobilization in Peru," Research Department Publications 4768, Inter-American Development Bank, Research Department.
- Grootaert, Christiaan & Narayan, Deepa, 2004. "Local Institutions, Poverty and Household Welfare in Bolivia," World Development, Elsevier, vol. 32(7), pages 1179-1198, July.
- Bird, Richard M., 1993. "Threading the Fiscal Labyrinth: Some Issues in Fiscal Decentralization," National Tax Journal, National Tax Association, vol. 46(2), pages 207-27, June.
- Finot, Iván, 2005. "Descentralización, transferencias territoriales y desarrollo local," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.
- George Gray-Molina & Ernesto Pérez de Rada & Ernesto Yáñez, 1999. "La economía política de reformas institucionales en Bolivia," IDB Publications (Working Papers) 7596, Inter-American Development Bank.
- Kornai, Janos, 1986.
"The Soft Budget Constraint,"
Wiley Blackwell, vol. 39(1), pages 3-30.
- Jorge Martinez-Vazquez & Andrey Timofeev, 2009. "Decentralization Measures Revisited," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0913, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
- Jin, Hehui & Qian, Yingyi & Weingast, Barry R., 2005.
"Regional decentralization and fiscal incentives: Federalism, Chinese style,"
Journal of Public Economics,
Elsevier, vol. 89(9-10), pages 1719-1742, September.
- Hehui Jin & Yingyi Qian & Barry Weingast, 1999. "Regional Decentralization and Fiscal Incentives: Federalism, Chinese Style," Working Papers 99013, Stanford University, Department of Economics.
- Baja Daza, Gover & Villarroel Böhrt, Sergio & Zavaleta Castellón, David, 2012.
"Diseño institucional e incentivos implicitos en la descentralización Boliviana (1994-2008)
[Institutional design and implicit incentives in Bolivia's decentralization model (1994-2008)]," MPRA Paper 48598, University Library of Munich, Germany.
- Faguet, Jean-Paul, 2004. "Does decentralization increase government responsiveness to local needs?: Evidence from Bolivia," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 867-893, March.
When requesting a correction, please mention this item's handle: RePEc:ris:revlde:1906. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tirza July Aguilar Salas)
If references are entirely missing, you can add them using this form.