Sage Journals: Discover world-class research

Abstract

We estimate the net fiscal benefit (NFB) and the fiscal effect of unconditional grants on wages for twenty-six Brazilian states in the period 2005 to 2009. In particular, we explore the analytical framework proposed in Albouy to investigate the efficiency and equity effects of unconditional intergovernmental grants in Brazil. This framework can be understood as a positive exercise to comprehend whether grants mitigate the NFB differences across localities and whether they promote equalization in certain criteria. We explore labor market characteristics such as minimum wage and informality to evaluate efficiency and equity in grant distribution. According to our estimates, workers moving to more productive areas would obtain, on average, Brazilian Reais (BRL$) 0.52 less per year in NFBs on their earnings. Results suggest that unconditional grant policy in Brazil is associated with inefficiency because higher-paying areas with larger shares of formal jobs in metropolitan regions are negative recipients of grants.

Keywords

intergovernmental transfers fiscal federalism net fiscal benefit unconditional grants

Get full access to this article

View all access options for this article.

References

Albouy

2009. “What Are Cities Worth? Land Rents, Local Productivity, and the Capitalization of Local Amenity Values.” NBER Working Paper No. 14981, Cambridge, MA.

Albouy

2012. “Evaluating the Efficiency and Equity of Federal Fiscal Equalization.” Journal of Public Economics 96:824–39.

Arbex

Freguglia

Chein

. 2013. “Informal Economy and Spatial Mobility: Are Informal Workers Economic Refugees?” Journal of Economic Studies 40:671–85.

Barros

R. P.

Ulyssea

. 2010. “On the Empirical Content of the Formal-informal Labor Market Segmentation Hypothesis.” Brazilian Review of Econometrics 30:289–310.

Bergstrom

T. C.

Goodman

R. P.

. 1973. “Private Demands for Public Goods.” American Economic Review 63:280–96.

Bird

Smart

. 2002. “Intergovernmental Fiscal Transfers: International Lessons for Developing Countries.” World Development 30:899–912.

Boadway

R. W.

2004. “The Theory and Practice of Fiscal Equalization.” CESifo Economic Studies 50:211–54.

Boadway

Robin

Flatters

Frank

. 1982. “Efficiency and Equalization Payments in a Federal System of Government: A Synthesis and Extension of Recent Results.” Canadian Journal of Economics 15:613–33.

Buchanan

James

. 1950. “Federalism and Fiscal Equity.” American Economic Review 40:583–99.

10.

Buchanan

James

. 1952. “Federal Grants and Resource Allocation.” Journal of Political Economy 60:208–17.

11.

Fajnzylber

2003. “Minimum Wage Effects throughout the Wage Distribution: Evidence from Brazil’s Formal and Informal Sectors.” Working Paper, Department of Economics and CEDEPLAR, UFMG, Brazil.

12.

Firpo

Reis

M. C.

. 2006. “Minimum Wage Effects on Labor Earnings Inequality: Some Evidence from Brazil.” Collection of the XXVIII Brazilian Econometrics Conference, Vol. 1, Salvador, Brazil.

13.

Higgins

Lustig

Ruble

Smeeding

. 2015. “Comparing the Incidence of Taxes and Social Spending in Brazil and the United States.” Review of Income and Wealth 62: S22–S46.

14.

Martinez-Vazquez

Boex

. 2001. “The Design of Equalization Grants: Theory and Applications.” World Bank Institute, Andrew Young School of Policy Studies, Georgia State University, Atlanta, GA.

15.

Mendes

Marcos

Miranda

Rogério B.

Blanco

Fernando

. 2008. “Transferências Intergovernamentais no Brasil: Diagnóstico e Proposta de Reforma.” Texto para Discussão 40, Consultoria de Orçamento do Senado Federal. Brasília.

16.

Monteiro

Joana

Ferraz

Claudio

. 2009. “Resource Booms and Voracious Politicians: The Effects of Oil Shocks on Patronage, Rent-seeking, and Elections.” unpublished, Department of Economics, Pontifícia Universidade Católica do Rio de Janeiro, Rio de Janeiro.

17.

Musgrave

Richard A.

1961. “Approaches to a Fiscal Theory of Political Federalism.” In Public Finances: Needs, Sources, and Utilization, ed., National Bureau Committee for Economic Research, 97–133. Princeton, NJ: Princeton University Press and National Bureau of Economic Research.

18.

Neumark

Cunningham

Siga

. 2006. “The Effects of the Minimum Wage in Brazil on the Distribution of Family Incomes: 1996-2001.” Journal of Development Economics 80:136–59.

19.

Oates

Wallace E.

2005. “Toward a Second-generation Theory of Fiscal Federalism.” International Tax and Public Finance 12:349–73.

20.

Shah

1991. The New Fiscal Federalism in Brazil. DP 124. Washington, DC: World Bank.

21.

Timoty

Wheaton

. 2001. “Intra-urban Wage Variation, Employment Location and Commuting Times.” Journal of Urban Economics 50:338–66.

Supplementary Material

Please find the following supplemental material available below.

For Open Access articles published under a Creative Commons License, all supplemental material carries the same license as the article it is associated with.

For non-Open Access articles published, all supplemental material carries a non-exclusive license, and permission requests for re-use of supplemental material or any part of supplemental material shall be sent directly to the copyright owner as specified in the copyright notice associated with the article.

0.00 MB

0.65 MB