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The Impact of Intergovernmental Transfers on Education Outcomes and Poverty Reduction

American Economic Journal Applied Economics · 2013 · 153 citations · 38 references

TL;DR

The study uses a regression discontinuity design to assess how intergovernmental transfers affect development outcomes. Extra transfers raised local government spending per capita by about 20 % over four years without crowding out revenue, increased schooling per capita by roughly 7 %, raised literacy rates by about 4 percentage points, cut poverty rates by about 4 percentage points, and boosted incumbent reelection chances by roughly 10 %. JEL codes: H72, H75, I21, I28, I32, I38, O15.

Abstract

This paper provides regression discontinuity evidence on development impacts of intergovernmental transfers. Extra transfers in Brazil increased local government spending per capita by about 20 percent over a 4 year period with no evidence of crowding out own revenue or other revenue sources. Schooling per capita increased by about 7 percent and literacy rates by about 4 percentage points. In line with the effect on human capital, the poverty rate was reduced by about 4 percentage points. Somewhat noisier results also suggest that the reelection probability of local incumbent parties in the 1988 elections improved by about 10 percentage points. (JEL H72, H75, I21, I28, I32, I38, O15)