American Economic Journal:
Applied Economics
ISSN 1945-7782 (Print) | ISSN 1945-7790 (Online)
Tax Me, but Spend Wisely? Sources of Public Finance and Government Accountability
American Economic Journal: Applied Economics
vol. 9,
no. 1, January 2017
(pp. 274–314)
Abstract
Existing evidence suggests that extra grant revenues lead to little improvements in public services in developing countries--but would governments spend tax revenues differently? This paper considers a program that invests in the tax capacity of Brazilian municipalities. Using variations in the timing of program uptake, I find that it raises local tax revenues and that the increase in taxes is used to improve both the quantity and quality of municipal education infrastructure. In contrast, increases in grants over which municipalities have the same discretion as taxes have no impact on any measure of local public infrastructure. These results suggest that the way governments are financed matters: governments spend increases in tax revenues more toward expenditures that benefit citizens than increases in grant revenues.Citation
Gadenne, Lucie. 2017. "Tax Me, but Spend Wisely? Sources of Public Finance and Government Accountability." American Economic Journal: Applied Economics, 9 (1): 274–314. DOI: 10.1257/app.20150509Additional Materials
JEL Classification
- H71 State and Local Taxation, Subsidies, and Revenue
- H75 State and Local Government: Health; Education; Welfare; Public Pensions
- H76 State and Local Government: Other Expenditure Categories
- I21 Analysis of Education
- I22 Educational Finance; Financial Aid
- O15 Economic Development: Human Resources; Human Development; Income Distribution; Migration
- R51 Finance in Urban and Rural Economies
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