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National or political cake? The political economy of intergovernmental transfers in Nigeria

Author

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  • Jean-François Maystadt
  • Muhammad-Kabir Salihu

Abstract

Rule-based intergovernmental transfers are often presented as the panacea to avoid the manipulation of transfers for political motives. We question that assertion in the case of Nigeria, where these transfers are highly dependent on natural resources and likely to be subject to elite capture. In this article, we use oil windfalls as a source of exogenous variation in the political discretion an incumbent government can exert in rule-based transfers. Exploiting within-state variation between 2007 and 2015 in Nigeria, an increase in VAT transfers induced by higher oil windfalls is found to improve the electoral fortune of an incumbent government. Our results question the promotion of rule-based transfers as a one-fits-all institutional solution in resource-abundant countries with relatively weak institutions.

Suggested Citation

  • Jean-François Maystadt & Muhammad-Kabir Salihu, 2019. "National or political cake? The political economy of intergovernmental transfers in Nigeria," Journal of Economic Geography, Oxford University Press, vol. 19(5), pages 1119-1142.
    • Handle: RePEc:oup:jecgeo:v:19:y:2019:i:5:p:1119-1142.
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    File URL: http://hdl.handle.net/10.1093/jeg/lby032
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    Citations

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    Cited by:

    1. Thiemo Fetzer & Stephan Kyburz, 2024. "Cohesive Institutions and Political Violence," The Review of Economics and Statistics, MIT Press, vol. 106(1), pages 133-150, January.
    2. Isabel Narbón-Perpiñá & Maria Teresa Balaguer-Coll & Diego Prior & Emili Tortosa-Ausina, 2023. "Vertical transfers, political alignment, and efficiency in local government," Working Papers 2023/08, Economics Department, Universitat Jaume I, Castellón (Spain).
    3. Marco Di Cataldo & Elena Renzullo, 2024. "EU Money and Mayors: Does Cohesion Policy affect local electoral outcomes?," Working Papers 2024: 02, Department of Economics, University of Venice "Ca' Foscari".

    More about this item

    Keywords

    Intergovernmental transfers; rule-based transfers; political manipulation; fiscal federalism; regional favouritism; fiscal decentralization; Nigeria;
    All these keywords.

    JEL classification:

    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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