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Vertical Fiscal Transfers and the Location of Economic Activity across a Country Regions.Theory and Evidence for Argentina

Listed author(s):
  • Pedro Moncarz


    (Universidad Nacional de Córdoba)

  • Sebastián Freille

    (Universidad Nacional de Córdoba; CONICET)

  • Alberto Figueras

    (Universidad Nacional de Córdoba)

  • Marcelo Capello

    (Universidad Nacional de Córdoba; IERAL de Fundación Mediterránea)

Argentina has an important system of vertical transfers with a compensatory aim including the convergence across sub-national regions. However, there still exist high levels of asymmetries among the country provinces. Extending Martin and Rogers’ FCM including non- tradable goods and public employment we analyse the effect on economic activity location that follows to changes on the regional distribution of transfers. An increase in the share of transfers a region receives positively effect the production of manufactures the higher are: transaction costs of goods produced under increasing returns to scale; the share of transfers that goes directly to consumers instead of local governments; the elasticity of substitution between differentiated goods; the share of consumers’ expenditure on manufactures via-as-vis on non- traded goods.

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Paper provided by Department of Economics - dECON in its series Documentos de Trabajo (working papers) with number 2410.

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Length: 33 pages
Date of creation: Nov 2010
Handle: RePEc:ude:wpaper:2410
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  1. Brecher, Richard A. & Bhagwati, Jagdish N., 1982. "Immiserizing transfers from abroad," Journal of International Economics, Elsevier, vol. 13(3-4), pages 353-364, November.
  2. Hristos Doucouliagos & Martin Paldam, 2009. "The Aid Effectiveness Literature: The Sad Results Of 40 Years Of Research," Journal of Economic Surveys, Wiley Blackwell, vol. 23(3), pages 433-461, 07.
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