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Tax Me, But Spend Wisely? Sources of Public Finance and Government Accountability

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  • Gadenne, Lucie

    (University of Warwick)

Abstract

Existing evidence suggests that extra grant revenues lead to little improvements in public services in developing countries - but would governments spend tax revenues di erently? This paper considers a program that invests in the tax capacity of Brazilian municipalities. Using variations in the timing of program uptake I nd that it raises local tax revenues and that the increase in taxes is used to improve both the quantity and quality of municipal education infrastructure. In contrast increases in grants over which municipalities have the same discretion as over taxes have no impact on any measure of local public infrastructure. These results suggest that the way governments are nanced matters: governments spend increases in tax revenues more towards expenditures that bene t citizens than increases in grant revenues.

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  • Gadenne, Lucie, 2016. "Tax Me, But Spend Wisely? Sources of Public Finance and Government Accountability," CAGE Online Working Paper Series 289, Competitive Advantage in the Global Economy (CAGE).
  • Handle: RePEc:cge:wacage:289
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    Cited by:

    1. Dina Pomeranz & José Vila-Belda, 2019. "Taking State-Capacity Research to the Field: Insights from Collaborations with Tax Authorities," Annual Review of Economics, Annual Reviews, vol. 11(1), pages 755-781, August.
    2. Julia Cage & Lucie Gadenne, 2014. "Tax Revenues, Development, and the Fiscal Cost of Trade Liberalization, 1792-2006," Working Papers hal-03460586, HAL.
    3. Federico Revelli, 2013. "Tax limits and local democracy," Working Papers 2013/29, Institut d'Economia de Barcelona (IEB).
    4. Arun Jaitley, 2018. "Economic Survey 2017: Volume I, Chapter 4: Reconciling Fiscal Federalism and Accountability: Is there a Low Equilibrium Trap?," Working Papers id:12443, eSocialSciences.
    5. Raphael Corbi & Elias Papaioannou & Paolo Surico, 2019. "Regional Transfer Multipliers," Review of Economic Studies, Oxford University Press, vol. 86(5), pages 1901-1934.
    6. Raphael Corbi & Elias Papaioannou & Paolo Surico, 2014. "Regional Transfers," NBER Working Papers 20751, National Bureau of Economic Research, Inc.
    7. Hoem Sjursen, Ingrid, 2018. "Accountability and taxation: Experimental evidence," Discussion Paper Series in Economics 24/2018, Norwegian School of Economics, Department of Economics.
    8. Julia Cage & Lucie Gadenne, 2014. "Tax Revenues, Development, and the Fiscal Cost of Trade Liberalization, 1792-2006," Working Papers hal-03460586, HAL.
    9. Revelli, Federico, 2013. "Tax Limits and Local Democracy," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201336, University of Turin.
    10. Cassidy, Traviss, 2017. "How Forward-Looking Are Local Governments? Evidence from Indonesia," MPRA Paper 97776, University Library of Munich, Germany, revised 01 Jun 2019.
    11. Julia Cage & Lucie Gadenne, 2014. "Tax Revenues, Development, and the Fiscal Cost of Trade Liberalization, 1792-2006," Sciences Po publications info:hdl:2441/4icc4hr7684, Sciences Po.
    12. Jorge Martinez-Vazquez & Cristian Sepulveda, 2020. "A Theoretical Rationale for the Fiscal-Gap Model of Equalization Transfers," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 76(1), pages 1-28.

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