Fabiana Rocha

Flypaper effect revisited: evidence for tax collection efficiency in Brazilian municipalities

The purpose of this article is to propose a reinterpretation of the traditional flypaper effect according to which central government transfers to local governments increase public spending by more than do increases in private income. Here, higher transfers from the federal government might induce less efficiency in local tax collection opposed to the income effect. Initially, we build a model in order to point out the possible existence of that flypaper effect in a context of standard maximization on the part of local governments. Next, we construct efficiency scores for Brazilian municipalities using Free Disposable Hull (FDH), taking into consideration two outputs: amount of per capita local tax collected -tax revenue- and the size of local informal economy - tax base. Last, using two stages least squares and Tobit regressions, which the instruments is built upon the rules established in the 1988 Brazilian Constitution and where we find that unconditional transfer funds to municipalities, we estimate that transfers have the opposite effect (negative) of consumers income on efficiency of taxation, which leads us to a reinterpretation of the flypaper effect.

Corruption and the size of government: causality tests for OECD and Latin American countries

The purpose of this article is to examine the causality between government size and corruption, and to verify if there is a different pattern of causality between developed Organization for Economic Co-operation and Development (OECD) countries (excluding Mexico) and developing countries (Latin American countries) during the period 1996 to 2003. Applying Granger and Huangs (1997) methodology we find evidence that size of government Granger causes corruption in both samples. Since a larger government involvement in private markets today will be followed in future by a higher level of corruption a policy advice would be to enhance governance. The promotion of good governance helps to combat corruption given that it complements efforts to reduce corruption more directly, and it is strongly recommended by the International Monetary Fund, other multilateral institutions, and all worried with the negative impacts of corruption on economic activity.

Como o mercado de juros futuros reage à comunicação do Banco Central

O objetivo deste artigo e verificar se uma melhor comunicacao por parte do Banco Central do Brasil torna a politica monetaria mais previsivel. Conclui-se que as taxas de juros aumentam no dia da divulgacao da ata, indicando que a comunicacao do Banco Central tende a ter um vies conservador, enquanto a volatilidade dos juros diminui. Obtem-se evidencia ainda de que a reacao do mercado independe do conteudo das atas, com comunicados que sinalizam reducao das taxas levando a uma reducao da volatilidade de mercado. Para tanto, foi construido um indice que tenta captar, a partir da leitura das atas do COPOM, se a sinalizacao e de aumento, estabilidade ou reducao dos juros, em linha com o construido por Rosa & Verga (2007) para analisar a comunicacao do Banco Central Europeu.

Fiscal adjustment in Brazil

Two questions are addressed in this paper. The first one is the determination of periods of fiscal consolidation and fiscal stimulus. The second one is the importance of the composition of fiscal adjustments for their success, defined as a declining debt to GDP ratio. We, characterize 1994 and 1999 as points of fiscal consolidation. The 1994 consolidation can not be considered successful since after that period the debt to GDP ratio has grown continuously. The adjustment can be characterized as a type 2 adjustment (Alesina and Perotti (1997)) in the sense that cuts were made mainly in public investment, while government wages and transfers remained almost unchanged. This type of adjustment usually has a low likelihood of being a success.

Resource Windfalls, Fiscal Effort and Public Spending: Evidence from Brazilian Municipalities

In 1997, Brazil approved a new law establishing the regulatory framework of oil and gas industry. One of the most important changes was the distribution of petroleum rents to states and Municipalities. The volume received by each municipality varies considerably, since it depends on a range of criteria that measure the impact of upstream activities on the specific municipality as well as the number of productive wells next to it. This paper aims at evaluating whether municipalities eligible to receive royalties exhibited a lower fiscal effort than the non-eligible ones. We use the local collection of Urban Property Tax (IPTU) as a measure of fiscal effort, after controlling for fiscal capacity of each municipality. We also assess whether municipalities are obeying requirements of spending oil rents, by measuring the impact of such rents on specific items of the budget, like personal, health, education and investment expenses. The data set comprehends about 4000 municipalities observed during seven years (from 1999 to 2005). We used the Arellano-Bond GMM estimator in a dynamic panel with fixed effects. Results allow concluding that windfall oil rents in fact reduces fiscal effort and increases the allocation of budgetary resources on investment, but the share of budget allocated on health, education, energy and housing expenses did not changed as consequence of oil royalties.

Inequality and size of government: evidence from Brazilian states

Purpose - This paper seeks to investigate the role of income-inequality on the size of local government. Design/methodology/approach - First, the paper extends the model proposed by Meltzer and Richard, allowing for spatial interaction in the redistributive in-kind transfers from the local governments. Second, it estimates the determinants of the size in local government taking into consideration spatial dependence in the variables. Findings - This model points that the poorer the median voter is, the higher should be the level of local public expenditures, but the spillover effect (spatial effect) in spending is undetermined. Second, using data on Brazilian states public finance, the results suggest a negative relation between expenditures (and tax revenues) and the median voter income, in favor to the model. While both public spending and tax rates exhibit negative spatial correlation (substitute goods), behavioral significance can be attached to the spatial process in public spending but not to the spatial process in the local tax rate. Originality/value - The paper provides a small extension of the Meltzer and Richard model allowing for spatial interaction and contributes to the empirical debate about inequality and the size of the government presenting the results for Brazil.

Composição do gasto público e crescimento econômico: uma avaliação macroeconômica da qualidade dos gastos dos Estados brasileiros

The purpose of this paper is to determine which components of public expenditure explained the Brazilian states´economic growth during the period 1986-2003. Expenditures are decomposed according to their economic classification (current and capital expenditures), and also according to their functional classification (transportation and communication, education, defense and health). Capital expenditures seem to be productive, that is, they enhance economic growth, while current expenditures are productive only if they represent less than 61% of total expenditure. Expenditures on transportation and communication, education, and defense also contribute to economic growth.

Is There Any Rationale to the Brazilian Fiscal Policy

Barros tax smoothing hypothesis (TSH) implies that, when faced by a temporary increase in expenditure, the government should issue debt in order to spread the increase in taxes over time and minimize the welfare costs of high tax rates. Changes in the tax rate should then be unpredictable. This paper performs a test of the TSH that goes beyond the random walk tests usually done in literature. It examines the implied restrictions of the TSH on a vector autoregression (VAR) model using Brazilian data for the period 1970-94. The tests reject the hypothesis for the full sample period. For the period 1987-92, however, disregarding the volatility of the actual budget surplus, the TSH seems to provide a better approximation to the historical movements of Brazilian fiscal data series.

Mensurando o desempenho e a eficiência dos gastos estaduais em educação fundamental e média

The purpose of this paper is to evaluate the relative performance and efficiency of Brazilian states in the provision of basic and secondary education. In order to do so performance indicators are initially built using quantitative and qualitative variables. These indicators are then used as products in order to capture cross-states differences in the levels of efficiency. The results indicate that the States with better performance are not necessarily the most efficient. Besides, for the great majority of States there is room to improve efficiency by moving towards best practice in public resources management.

Decentralization and corruption: evidence from primary health-care programmes

The aim of this article is to evaluate whether there is an association between decentralization and corruption. In order to do so we analyse Brazilian health-care programmes that are run locally. To construct objective measures of corruption, we use the information from the reports of the auditing programme of the local governments of Brazil. Results point that there is no relationship between decentralization and corruption, whatever the measure of decentralization used.