Measuring Fiscal Spillovers in Brazilian Municipalities. (March 2021)

• Record Type: Journal Article
• Authors: Castro, Marcelo; Mattos, Enlinson
• Is Part Of: Public finance review. Volume 49:Number 2(2021)
• Page Start: 221
• Page End: 261
• Publication Date: 2021-03
• Subjects: fiscal federalism -- program evaluation -- fiscal spillover -- flypaper effect; Finance, Public -- Periodicals; 336.005
• DOI: 10.1177/1091142121993522
• Languages: English
• ISSNs: 1091-1421

Abstract

This article documents fiscal spillovers after an exogenous increase in the main federal transfer to Brazilian municipalities. We explore that Municipalities' Participation Fund is distributed according to the local population and abruptly changes at some thresholds. We disentangle spillovers using bordering municipalities near different cutoffs, showing that the flypaper effect in local economies can be partially explained by bordering municipalities' grants—roughly 20 percent. Fiscal spillovers are generally positive, except for spending in public health and sanitation for some population ranges.