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Oil windfalls and tax inefficiency: evidence from Brazil

  • Fernando Antonio Slaibe Postali

    ()

This paper investigates whether Brazilian municipalities are losing efficiency when collecting local taxes in response to oil windfalls. A two-stage procedure was adopted. First, we calculate the efficiency scores for tax collection using the Data Envelopment Analysis (DEA) method. In the second stage, the efficiency scores are used as the dependent variable in a quantile regression model to assess whether oil rents affect this indicator. The results reveal that the municipalities benefitting from oil revenues (royalties) reduce their efficiency in collecting taxes in response to such grants, which signals that they generate some type of X-inefficiency in municipal public management. Using a Cost-Minimization DEA, it is possible to avoid the problem of mixing technical efficiency with unobservable preferences on public goods. It is also possible to decompose efficiency within three components: technical, allocative and economic.

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File URL: http://www.fea.usp.br/feaecon/RePEc/documentos/FernandoPostali02WP.pdf
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Paper provided by University of São Paulo (FEA-USP) in its series Working Papers, Department of Economics with number 2014_02.

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Date of creation: 18 Mar 2014
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Handle: RePEc:spa:wpaper:2014wpecon2
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  1. Ferrier, Gary D. & Lovell, C. A. Knox, 1990. "Measuring cost efficiency in banking : Econometric and linear programming evidence," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 229-245.
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  3. Maria Sousa & Borko Stošić, 2005. "Technical Efficiency of the Brazilian Municipalities: Correcting Nonparametric Frontier Measurements for Outliers," Journal of Productivity Analysis, Springer, vol. 24(2), pages 157-181, October.
  4. Roger Koenker & Kevin F. Hallock, 2001. "Quantile Regression," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 143-156, Fall.
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  8. Deller, Steven C, 1992. "Production Efficiency in Local Government: A Parametric Approach," Public Finance = Finances publiques, , vol. 47(1), pages 32-44.
  9. Button, Kenneth J & Weyman-Jones, Thomas G, 1992. "Ownership Structure, Institutional Organization and Measured X-Efficiency," American Economic Review, American Economic Association, vol. 82(2), pages 439-45, May.
  10. Stigler, George J, 1976. "The Xistence of X-Efficiency," American Economic Review, American Economic Association, vol. 66(1), pages 213-16, March.
  11. Frantz, Roger, 1992. "X-Efficiency and Allocative Efficiency: What Have We Learned?," American Economic Review, American Economic Association, vol. 82(2), pages 434-38, May.
  12. Button, Kenneth J & Weyman-Jones, Thomas G, 1994. " X-Efficiency and Technical Efficiency," Public Choice, Springer, vol. 80(1-2), pages 83-104, July.
  13. DE BORGER, Bruno & KERSTENS, Kristiaan, 1994. "Cost efficiency of Belgian local governments: A comparative analysis of FDH, DEA and econometric approaches," SESO Working Papers 1994002, University of Antwerp, Faculty of Applied Economics.
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  16. Robert P. Inman, 2008. "The Flypaper Effect," NBER Working Papers 14579, National Bureau of Economic Research, Inc.
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