Discussion Paper, School of Economics, University of the Philippines 2013-04
While gerrymandering in developing countries is often pushed by local authorities to secure political advantages, fiscal grants systems under decentralization may also have result in the same. We investigate this issue to identify the correlates of the growth in the number of cities in the Philippines in 2001-2010. Using a panel of municipal-level data, incremental fiscal transfers are found to drive cityhood. Also, political payoffs - like the incumbent mayor's re-election or having another member of the same political clan elected to the same position - motivate the creation of new cities. Reforms in the country's fiscal transfer program are suggested.