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Fiscal Transfers a Curse or Blessing? Evidence of Their Effect on Tax Effort for Municipalities in Sinaloa, Mexico

Author

Listed:
  • Gustavo Canavire-Bacarreza

    (Georgia State University and IZA)

  • Nicolas Guadalupe Zuniga Espinoza

    (Universidad Autonoma de Sinaloa)

Abstract

This article studies the impact of vertical fiscal transfers on local tax effort in Mexico, considering evidence for municipalities in Sinaloa between 1993 and 2008. Based on cadastral information, gross added value and property taxes we create a “pure” indicator of fiscal effort which is used to analyze the effect of conditional and unconditional transfers on this indicator. We employ econometric techniques such as panel data and the Arellano Bond method to correct endogeneity. The results show that conditional transfers, which began in 1998, have generated laziness towards property tax collection, negatively affecting the fiscal effort, even after controlling for demographic factors, population and the index of exclusion.

Suggested Citation

  • Gustavo Canavire-Bacarreza & Nicolas Guadalupe Zuniga Espinoza, 2010. "Fiscal Transfers a Curse or Blessing? Evidence of Their Effect on Tax Effort for Municipalities in Sinaloa, Mexico," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1030, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    • Handle: RePEc:ays:ispwps:paper1030
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    References listed on IDEAS

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    8. Richard M. Bird & Jorge Martinez-Vazquez & Benno Torgler, 2014. "Societal Institutions and Tax Effort in Developing Countries," Annals of Economics and Finance, Society for AEF, vol. 15(1), pages 301-351, May.
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    12. Arellano, Manuel, 2003. "Panel Data Econometrics," OUP Catalogue, Oxford University Press, number 9780199245291.
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    14. Bert Hofman & Susana Cordeiro Guerra, 2007. "Ensuring Inter-Regional Equity and Poverty Reduction," Springer Books, in: Jorge Martinez-Vazquez & Bob Searle (ed.), Fiscal Equalization, chapter 0, pages 31-59, Springer.
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    Cited by:

    1. Manuel E. Lago & Santiago Lago-Peñas & Jorge Martinez-Vazquez, 2022. "On the effects of intergovernmental grants: a survey," Working Papers. Collection A: Public economics, governance and decentralization 2204, Universidade de Vigo, GEN - Governance and Economics research Network.
    2. Manuel E. Lago & Santiago Lago-Peñas & Jorge Martinez-Vazquez, 2024. "On the effects of intergovernmental grants: a survey," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(3), pages 856-908, June.

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