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Fiscal Transfers a Curse or Blessing? Evidence of Their Effect on Tax Effort for Municipalities in Sinaloa, Mexico

  • Gustavo Canavire-Bacarreza

    (Georgia State University and IZA)

  • Nicolas Guadalupe Zuniga Espinoza

    (Universidad Autonoma de Sinaloa)

This article studies the impact of vertical fiscal transfers on local tax effort in Mexico, considering evidence for municipalities in Sinaloa between 1993 and 2008. Based on cadastral information, gross added value and property taxes we create a “pure” indicator of fiscal effort which is used to analyze the effect of conditional and unconditional transfers on this indicator. We employ econometric techniques such as panel data and the Arellano Bond method to correct endogeneity. The results show that conditional transfers, which began in 1998, have generated laziness towards property tax collection, negatively affecting the fiscal effort, even after controlling for demographic factors, population and the index of exclusion.

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File URL: http://icepp.gsu.edu/files/2015/03/ispwp1030.pdf
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Paper provided by International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University in its series International Center for Public Policy Working Paper Series, at AYSPS, GSU with number paper1030.

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Length: 30 pages
Date of creation: 01 Oct 2010
Date of revision:
Handle: RePEc:ays:ispwps:paper1030
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Web page: http://aysps.gsu.edu/isp/index.html

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  1. Richard M. Bird & Jorge Martinez-Vazquez & Benno Torgler, 2004. "Societal Institutions and Tax Effort in Developing Countries," CREMA Working Paper Series 2004-21, Center for Research in Economics, Management and the Arts (CREMA).
  2. Jorge Martinez-Vazquez & LF Jameson Boex, 1997. "An Analysis of Alternative Measures of Fiscal Capacity for Regions of the Russian Federation," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper9704, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  3. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  4. Abhijit Sen Gupta, 2007. "Determinants of Tax Revenue Efforts in Developing Countries," IMF Working Papers 07/184, International Monetary Fund.
  5. Sour, Laura, 2008. "Un repaso de conceptos sobre capacidad y esfuerzo fiscal, y su aplicación para los gobiernos locales mexicanos
    [An Overview of Current Concepts of the fiscal capacity and effort, and its applicatio
    ," MPRA Paper 50451, University Library of Munich, Germany.
  6. Wallace E. Oates, 1999. "An Essay on Fiscal Federalism," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1120-1149, September.
  7. Jorge Martinez-Vasquez & Jameson Boex, 2001. "Russia's Transition to a New Federalism," World Bank Publications, The World Bank, number 15248, June.
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