Can Fiscal Transfers Increase Local Revenue Collection? Evidence from the Philippines

47 Pages Posted: 22 Sep 2018

See all articles by Erin Troland

Erin Troland

Board of Governors of the Federal Reserve System

Date Written: Jan 15, 2016

Abstract

The power to tax is critical to economic development. In developing countries, 40-60% of potential revenues go uncollected, and local funding for public goods is limited. Federal governments often provide substantial transfer money to increase spending on local public goods. However, standard theory predicts localities will primarily use this money to decrease, or "crowd out," local tax collection. I present new causal evidence that, contrary to standard theory, transfers increase or "crowd in" local revenue by $0.35-$0.39 per additional federal dollar. I show this result is largely driven by increased local tax enforcement and/or compliance.

Suggested Citation

Troland, Erin, Can Fiscal Transfers Increase Local Revenue Collection? Evidence from the Philippines (Jan 15, 2016). Available at SSRN: https://ssrn.com/abstract=3242240 or http://dx.doi.org/10.2139/ssrn.3242240

Erin Troland (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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