Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/161496 
Authors: 
Year of Publication: 
2016
Series/Report no.: 
WIDER Working Paper No. 2016/113
Publisher: 
The United Nations University World Institute for Development Economics Research (UNU-WIDER), Helsinki
Abstract: 
Do intergovernmental transfers reduce revenues collected by local government authorities (LGAs)? There is already a well-established body of literature in public finance, which argues that intergovernmental grants 'crowd out' local revenues. Most existing studies, however, explore the fiscal implications of intergovernmental transfers in high-income countries where sound fiscal systems are taken for granted. In this paper, I explore the impact of intergovernmental transfers on local revenues in sub-Saharan Africa, a region where local fiscal capacity is limited and endogenously determined by financial support from international donors and the central government. I argue that in places where the existing capacity of LGAs to administer tax collection is weak and political costs of enforcing taxation are low - which are perennial features of many rural districts in Africa - intergovernmental transfers facilitate local revenue generation instead of undermining it. Analysing newly available quarterly fiscal data on local revenues in Tanzania, I show that intergovernmental grants improve the mobilization of local revenues, and also that the positive effect of fiscal transfers on local revenue collection is particularly pronounced in rural districts.
Subjects: 
public finance
intergovernmental grants
crowding out
sub-Saharan Africa
fiscal capacity
tax collection
local revenues
Tanzania
JEL: 
H29
H41
H71
H79
Persistent Identifier of the first edition: 
ISBN: 
978-92-9256-157-4
Document Type: 
Working Paper

Files in This Item:
File
Size
867.84 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.