Affordable Access

Intergovernmental transfers and fiscal effort in Peruvian local governments

Publication Date
  • H71 - State And Local Taxation
  • Subsidies
  • And Revenue
  • H77 - Intergovernmental Relations
  • Federalism
  • Secession
  • Design
  • Political Science


The purpose of this paper is to identify the causal relationship between intergovernmental transfers and fiscal effort. Empirical evidence from Peruvian municipalities supports a negative relation. The substitution effect is decreasing on the level of municipalities’ expenditure and tends to disappear for high-expenditure localities. Given this phenomenon, devolving responsibilities to sub-national governments might reduce fiscal effort and deteriorate fiscal balance especially among localities with lower fiscal capacity. A possible solution might be the inclusion of fiscal effort indicators in the intergovernmental transfer design.

There are no comments yet on this publication. Be the first to share your thoughts.