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Intergovernmental Transfers and Regional Income Inequalities: An Empirical Analysis of Uruguay

Author

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  • Leonel Muinelo-Gallo

    (Instituto de Economía de la Universidad de la República - Uruguay)

  • Adrián Rodríguez-Miranda

    (Instituto de Economía de la Universidad de la República - Uruguay)

  • Pablo Castro-Scavone

    (Instituto de Economía de la Universidad de la República - Uruguay)

Abstract

In this paper we explore the bidirectional relationship between intergovernmental transfers and regional income inequalities in Uruguay. Our study is based on the construction of a simultaneous equations model that is designed to capture the factors that jointly determine these endogenous variables, and employs a panel of departments (regions) over the period 1990-2012. The empirical results show that central government transfers to regional governments do not have a significant impact on regional income inequality levels. In fact, our estimates support the idea that regional inequalities have a significant and negative impact on the allocation to regions of intergovernmental transfers in that the richest regions receive greater transfers per capita. Intergovernmental per capita transfers also are positively determined by past public expenditure executed by regional governments, and negatively affected by the population size of the departments. These results have clear policy implications as they show that the normative scheme governing intergovernmental regional transfers in Uruguay must be revised if the objective is to give the country greater territorial cohesion.

Suggested Citation

  • Leonel Muinelo-Gallo & Adrián Rodríguez-Miranda & Pablo Castro-Scavone, 2016. "Intergovernmental Transfers and Regional Income Inequalities: An Empirical Analysis of Uruguay," Hacienda Pública Española / Review of Public Economics, IEF, vol. 219(4), pages 9-34, December.
    • Handle: RePEc:hpe:journl:y:2016:v:219:i:4:p:9-34
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    References listed on IDEAS

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    Cited by:

    1. Urraburu Bordon, Joana & Castro Scavone, Pablo & Muinelo-Gallo, Leonel, 2019. "Fiscal disparities in Uruguay’s regions: the role of a new system of intergovernmental equalization transfers," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    2. Muinelo-Gallo, Leonel & Azar, Paola, 2018. "Testing regional intergovernmental transfers asymmetries in Uruguay," MPRA Paper 90245, University Library of Munich, Germany.
    3. Leonel Muinelo-Gallo, 2021. "Testing regional intergovernmental transfers effects in Uruguay," Sobre México. Revista de Economía, Sobre México. Temas en economía, vol. 2(4), pages 6-38.

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    More about this item

    Keywords

    intergovernmental transfers; regional inequalities; panel data; simultaneous equations; Uruguay.;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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