Does fiscal redistribution discourage local public investment?

Matheson, Thornton

doi:10.1111/j.1468-0351.2005.00210.x

Cited by 11 publications

(4 citation statements)

References 22 publications

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“…For regions in Russia over the period 1994-1997, Matheson (2005 points out that horizontal redistribution leads to a decrease in local public investment. Moreover, the strength of this relationship is found to be dependent on administrative status (republics vs. non-republics) and regional wealth.…”

Section: Related Literaturementioning

confidence: 99%

The determinants of local public investments in Poland

Banaszewska¹

2018

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Research background: Local public investments satisfy basic local communities’ needs and are crucial from the perspective of regional convergence. Against this background, investments by the Polish local government pose as an interesting research subject. It is because, due to its size and dynamics, local public investments exert a considerably significant influence on the Polish economy. Self-government entities with primary responsibility for conducting local public in-vestments in Poland are municipalities. Purpose of the article: The paper aims to identify fiscal, demographic and infra-structural determinants of municipal investment spending in Poland. Methods: We use panel data for 2,412 Polish municipalities over the period 2007–2014. For institutional reasons, the sample excludes cities with county rights. The baseline specification employs two-way fixed-effects (FE) estimation that controls both for municipality and year fixed effects. To test for robustness, the sample is restricted to municipalities with up to 20,000; 10,000 and 5,000 inhabitants. For each considered sample, there are four regression specifications. Findings & Value added: Investment spending increases both in own revenues and grants. On the contrary, we document the negative impact of indebtedness level and the coverage of water supply and sewage systems. The coefficients on population size and the share of old inhabitants cease to be negative and statistically significant for municipalities with fewer than 10,000 inhabitants. The results indicate that, apart from fiscal capacity, the investment policies of Polish municipalities are affected by economies of scale, local communities’ preferences and infrastructural endowment. The study also shows that incurring debt should be of particular concern for supervisory and control bodies.

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Section: Related Literaturementioning

confidence: 99%

The determinants of local public investments in Poland

Banaszewska¹

2018

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“…Although the differences have been formally abolished, they may still have an effect on the allocation of transfers. Many researchers document that 21 ethnic republics have been favoured in the form of larger subsidies, permission to retain a higher share of tax collections and special decrees granting economic benefits (Martinez‐Vazquez and Boex, 2001; Matheson, 2005). I also control for regional population, as it may be the case that big regions have better bargaining positions with the federal centre.…”

Section: Tactical Grants: Formulating Hypothesesmentioning

confidence: 99%

Intergovernmental grants in Russia

Jarocinska

2010

Economics of Transition

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Two hypotheses about the determinants of Russian intergovernmental grants are tested. According to the first hypothesis, federal transfers to regions correlate with recent voting behaviour of regional electorates. The second hypothesis states that transfers are higher in regions with politically powerful governors. I find a strong confirmation for the first hypothesis and no evidence for the second hypothesis for the years 1995-99. This result is robust across specifications. However, in the years 2000-2004 electoral variables show no effect on transfers. The only significant political variable is Putin's visits to regions. Copyright (c) 2010 The Author. Journal compilation (c) 2010 The European Bank for Reconstruction and Development.

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“…Federal redistribution generates incentives for regions to under-invest. Thereby they can attract higher federal support (Dahlby, 1996;Matheson, 2005;Fenge and Wrede, 2004). However, this literature does not account for incentives arising in more sophisticated federal structures with more than two tiers of government.…”

Section: Introductionmentioning

confidence: 99%

Fiscal externalities in a three-tier structure of government

Каппелер

2014

Journal of Economic Studies

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Purpose – Federal systems are often more sophisticated than assumed in the literature. In many cases, at least three tiers of government are involved in federal decision making. The purpose of this paper is to cast some light on this increasingly important issue in fiscal federalism. Design/methodology/approach – In a model with three tiers of government, the author analyzes corrective policies in the presence of fiscal externalities generated by federal redistribution. Findings – The author identifies an additional qualitative incentive effect, particularly for intermediate governments. They behave strategically to attract additional redistribution funds from outside, though still using corrective policies to provide investment incentives toward their own regions. The results also suggest that differently from the USA the federal system of the EU may lead to inefficiently low regional investment. Originality/value – The presented model is a first step toward analyzing strategic behavior and the effect of corrective policies in more complicated federal set ups with three tiers of government involved. This is relevant for federal structures such as Germany or the USA, as well as for government interactions at the international level.

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Does fiscal redistribution discourage local public investment?

Cited by 11 publications

References 22 publications

The determinants of local public investments in Poland

The determinants of local public investments in Poland

Intergovernmental grants in Russia

Fiscal externalities in a three-tier structure of government

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