Local Spending, Transfers and Costly Tax Collection

Author: 
Peer reviewed: 
No, item is not peer reviewed.
Scholarly level: 
Faculty/Staff
Date created: 
2012
Keywords: 
Flypaper effect
Intergovernmental transfers
Fiscal decentralization
Abstract: 

This paper studies the effect of costly taxation on the fiscal response of local governments to intergovernmental transfers. Using a panel dataset of Peruvian municipalities, I find robust evidence that central government's grants have a greater stimulatory effect in municipalities facing higher tax collection costs. The results are consistent with costly taxation partially explaining the flypaper effect.

Language: 
English
Document type: 
Report
Rights: 
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