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Intergovernmental transfers and regional income inequalities in Uruguay

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  • Muinelo-Gallo, Leonel
  • Rodriguez-Miranda, Adrián
  • Castro-Scavone, Pablo

Abstract

In this paper we explore the bidirectional relationship between intergovernmental transfers and regional income inequalities in Uruguay. Based on the construction of a simultaneous equations model, that accounts for the joint determination of these two variables, and by using a panel of departments (regions) over the period 1990-2012, our empirical results show that the central government transfers to regional governments does not have a significant impact on regional income inequalities levels. In fact, these transfers are strongly determined by the historical validation of public expenditure executed by regional governments but not by regional income disparities levels. Our results are consistent with the lack of territorial cohesion criteria in the normative governing the allocation of these transfers in Uruguay. Finally, these results have clear policy implications based on the necessary revision of the normative scheme of intergovernmental regional transfers in Uruguay if the objective is to arrive to a country with a higher degree of territorial cohesion.

Suggested Citation

  • Muinelo-Gallo, Leonel & Rodriguez-Miranda, Adrián & Castro-Scavone, Pablo, 2017. "Intergovernmental transfers and regional income inequalities in Uruguay," MPRA Paper 76983, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:76983
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    More about this item

    Keywords

    intergovernmental transfers; regional inequalities; panel data; simultaneous equations; Uruguay;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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