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The Incentive Effects of Conditional and Unconditional Transfers on Local Own Revenue Generation: Empirical Evidence from Moroccan Municipalities

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  • Jean-François BRUN

    (Centre d'Etudes et de Recherches sur le Développement International(CERDI))

  • Maria EL KHDARI

Abstract

The fiscal incentives literature emphasizes how the design of transfer systems has a significant implication on the behavior of local governments within decentralized systems. The empirical findings on the relationship between intergovernmental transfers and the incentives they create for local revenue generation are inconclusive and differ from country to country. Given the lack of data on local public finances, this type of study rarely involves developing countries. Using a unique and rich socio-economic and public finance data covering a large set of Moroccan municipalities over the period 2005 to 2009, this paper contributes to the new generation of fiscal federalism literature by assessing the fiscal incentive effects of two types of transfers: general purpose transfers (unconditional) defined by a formula and specific purpose transfers (conditional) allocated on an ad-hoc basis. After correcting for the endogeneity problem, our findings support the existence of a significant incentive effect of unconditional transfers and a less robust effect of conditional transfers. Suggesting that transfers from the central government complement local own revenues by encouraging Moroccan municipalities to collect more revenues.

Suggested Citation

  • Jean-François BRUN & Maria EL KHDARI, 2016. "The Incentive Effects of Conditional and Unconditional Transfers on Local Own Revenue Generation: Empirical Evidence from Moroccan Municipalities," Working Papers 201606, CERDI.
    • Handle: RePEc:cdi:wpaper:1790
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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. Jean Raoul NKOUDOU BENGONO & Boniface EPO NGAH & Simon Pierre ONANA, 2023. "Effets des transferts intergouvernementaux sur la mobilisation des recettes publiques locales : cas des communes camerounaises," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 58, pages 83-101.
    3. 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.
    4. Raghbendra Jha & Hari K. Nagarajan & Anirudh Tagat, 2019. "Restricted and Unrestricted Fiscal Grants and Tax Effort of Panchayats in India," ASARC Working Papers 2019-02, The Australian National University, Australia South Asia Research Centre.
    5. Masaki, Takaaki, 2018. "The impact of intergovernmental transfers on local revenue generation in Sub-Saharan Africa: Evidence from Tanzania," World Development, Elsevier, vol. 106(C), pages 173-186.
    6. Jean-François Brun & Tiangboho Sanogo, 2017. "Effect of central transfers on municipalities' own revenue mobilization: Do conflict and local revenue management matter?," CERDI Working papers halshs-01613108, HAL.
    7. Jean-François Brun & Tiangboho Sanogo, 2017. "Effect of central transfers on municipalities' own revenue mobilization: Do conflict and local revenue management matter?," Working Papers halshs-01613108, HAL.
    8. Yarlina Yacoub, 2019. "Flypaper Effect in Indonesia: The Case of Kalimantan," GATR Journals jfbr164, Global Academy of Training and Research (GATR) Enterprise.
    9. Vallés-Giménez, Jaime & Zárate-Marco, Anabel, 2017. "Catalytic effect of capital transfers in a federal context: The case of Spanish regions," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 11, pages 1-27.

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    More about this item

    Keywords

    Decentralization; Local public finance; Fiscal incentives; Intergovernmental transfers; Morocco; Pan;
    All these keywords.

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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