Wages, informality and net fiscal benefit in a Federation : evaluating intergovernmental grants in Brazilian municipalities Ricardo Politi and Enlinson Mattos
By: Politi, Ricardo
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Contributor(s): Mattos, Enlinson.
Material type: 
ArticlePublisher: 2018Subject(s): SALARIOS | SUBVENCIONES PUBLICAS | DESEQUILIBRIOS REGIONALES | INGRESOS FISCALES | FEDERALISMO FISCAL | BRASILOnline resources: Click here to access online
In:
Public Finance Review v. 46, n. 3, May 2018, p. 486-513Summary: 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$) 0.52 less per year in NFBs on their earnings. Results suggest that unconditional grant policy in Brazil is
associated with inefficiency because higher-paying areas with larger shares of formal jobs in metropolitan regions are negative recipients of grants.
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| OP 581/2018/3 Public Finance Review | OP 581/2018/3-1 Decentralized governance, expenditure composition and preferences for public goods | OP 581/2018/3-2 From urban core to wealthy towns | OP 581/2018/3-3 Wages, informality and net fiscal benefit in a Federation | OP 581/2018/4 Public Finance Review | OP 581/2018/4-1 Time to adoption of local option sales taxes | OP 581/2018/4-2 Tax incentives and noncompliance |
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Resumen.
Bibliografía.
We estimate the net fiscal benefit (NFB) and the fiscal effect of unconditional grants on wages for twenty-six Brazilian states in the period 2005 to 2009. In particular, we explore the analytical framework proposed in Albouy to investigate the efficiency and equity effects of unconditional intergovernmental grants in Brazil. This framework can be understood as a positive exercise to comprehend whether grants mitigate the NFB differences
across localities and whether they promote equalization in certain criteria. We explore labor market characteristics such as minimum wage and informality to evaluate efficiency and equity in grant distribution. According to our estimates, workers moving to more productive areas would obtain, on average, Brazilian Reais (BRL$) 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.
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