Should voters be afraid of hard budget constraint legislation? fiscal responsibility law in brazilian municipalities

This manuscript demonstrates that voters have nothing to be afraid of when new hard budgetconstraint legislation is implemented. Our claim is that this kind of legislation reduces theasymmetry of information between voters and incumbents over the budget and, as aconsequence, the latter have incentives to increase the supply of public goods. As anationwide institutional innovation, the Fiscal Responsibility Law (FRL) is exogenous to allmunicipalities; therefore, there is no self-selection bias in its implementation. We show thatpublic goods expenditure increases after the FRL. Second, this increase occurs inmunicipalities located in the country’s poorest region. Third, our findings can be extended tothe supply of public goods because the higher the expenditure with health and education, thegreater the probability of incumbents being re-elected. Finally, there exists a “de facto”higher supply of public goods in education (number of per capita classrooms) after the FRL.

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 consumer's income on efficiency of taxation, which leads us to a reinterpretation of the flypaper effect.O objetivo do artigo é propor uma reinterpretação do tradicional efeito flypaper, fenômeno que ocorre quando as transferências do governo central para os governos locais aumentam o gasto público mais do que aumentos na renda privada. Aqui as transferências mais altas podem induzir menor eficiência na coleta de impostos do que os aumentos na renda. Inicialmente construímos um modelo que aponta a possibilidade de existência de efeito flypaper no contexto de um modelo de maximização padrão por parte dos governos locais. Depois construímos scores de eficiência para os municípios brasileiros usando Free Disposable Hull (FDH), levando em consideração dois produtos: a quantidade de impostos per capita coletados localmente - receita tributária - e o tamanho da economia informal - base tributária. Finalmente, usando mínimos quadrados dois estágios e regressões Tobit, em que o instrumento é construído a partir das regras de cálculo das transferências não condicionais estabelecidas na Constituição de 1988, e onde encontramos evidência de que as transferências têm o efeito oposto (negativo) ao da renda sobre a eficiência na taxação, chegou-se à reinterpretação do efeito flypaper

Abertura da economia com manutenção do nível de emprego e política cambial às avessas

RESUMO O objetivo deste artigo é demonstrar sob quais circunstâncias uma política destinada a abrir a economia pode não conseguir mudar o nível de emprego. Este tipo de circunstâncias ocorre porque neste modelo é considerada a dinâmica interna e externa para uma correta arbitragem da taxa de câmbio real

Municipalities secession and uncertainty on public goods provision

This paper investigates the causes of municipalities secession in Brazil. The theoretical modelproposes that the median voter is not fully informed about the efficiency effect of secession on publicgood provision and uses the break up decision undertaken by neighbor’s municipalities within thestate to account for his voting. Our empirical results confirms that prediction