Template-type: ReDIF-Paper 1.0
Author-Name: Cheng-Tao Tang
Author-Name-First: Cheng-Tao Tang
Author-Name-Last: Cheng-Tao Tang
Author-Email: ct.tang@iuj.ac.jp
Author-Workplace-Name: IUJ Research Institute, International University of Japan
Author-Name: Chun Yee Wong
Author-Name-First: Chun Yee Wong
Author-Name-Last: Chun Yee Wong
Author-Email: jcywong@iuj.ac.jp
Author-Workplace-Name: IUJ Research Institute, International University of Japan
Author-Name: Orelie Bathan Delas Alas
Author-Name-First: Orelie Bathan Delas Alas
Author-Name-Last: Orelie Bathan Delas Alas
Author-Email: odelasalas@iuj.ac.jp
Title: Effects of Intergovernmental Transfers on Income and Poverty Rates: Evidence from the Philippines
Abstract: Despite that subnational governments are key actors in the provision of public services, there are concerns about whether providing additional funding to them in developing countries can raise the living standards of local communities. This study investigates the impact of intergovernmental transfers on development outcomes at municipality and city levels in the Philippines from 1994 to 2015. Since the revenue-sharing mechanism between central and local governments in the Philippines follows a predetermined formula, we leverage this feature and apply the instrumental variable (IV) method for estimation. Our results suggest that the household disposable income per capita increases by 9.6% in the long run due to extra transfers of 1,000 pesos per capita in the Philippine local governments. The poverty rate has also decreased by approximately five percentage points in the long run. The improvement of development outcomes mainly occurs in small and less-developed local governments. Finally, we examine the effect of intergovernmental transfers on local expenditure and taxation; then we discuss how the results of local finance behavior can explain the observed developmental impact.
Classification-JEL: C26, H71, H72, H75, I32, O15
Length: 67 pages
Creation-Date: 2022-08
Number: EMS_2022_06
File-URL: https://www.iuj.ac.jp/workingpapers/index.cfm?File=EMS_2022_06.pdf
File-Format: Application/pdf
File-Function: Second version, 2023
File-Size: 7.82MB
Keywords: Intergovernmental transfer, income, poverty, instrumental variable, the Philippines
Handle: RePEc:iuj:wpaper:EMS_2022_06