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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.

Suggested Citation

  • 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. Lucie Gadenne, 2017. "Tax Me, but Spend Wisely? Sources of Public Finance and Government Accountability," American Economic Journal: Applied Economics, American Economic Association, pages 274-314.
    2. Oskar Nupia, 2017. "Income Taxes, Political Accountability and Public Goods Provision," DOCUMENTOS CEDE 015835, UNIVERSIDAD DE LOS ANDES-CEDE.
    3. Cagé, Julia & Gadenne, Lucie, 2016. "Tax Revenues, Development, and the Fiscal Cost of Trade Liberalization, 1792-2006," CAGE Online Working Paper Series 303, Competitive Advantage in the Global Economy (CAGE).
    4. Revelli, Federico, 2013. "Tax Limits and Local Democracy," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201336, University of Turin.
    5. Mascagni, Giulia, 2016. "From the Lab to the Field: a Review of Tax Experiments," Working Papers 8967, Institute of Development Studies, International Centre for Tax and Development.
    6. 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.
    7. Tiago P. Ferraz, 2016. "Benefit Sharing Exploring Water Resources in Brazil," Working Papers, Department of Economics 2016_13, University of São Paulo (FEA-USP).
    8. 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.
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    10. Catalina Tejada & Eliana Ferrara & Henrik Kleven & Florian Blum & Oriana Bandiera & Michel Azulai, 2015. "State Effectiveness, Growth, and Development," Working Papers id:6668, eSocialSciences.

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    Keywords

    JEL Classification:;

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • H76 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Other Expenditure Categories
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies

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