Public expenditures and debt at the subnational level: Evidence of fiscal smoothing from Argentina

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February 2017
Paper author(s): 
Martín Besfamille
Nicolás Grosman
Diego Jorrat
Osmel Manzano
Pablo Sanguinetti
Politics and Economy
Fiscal Policy - Public and Welfare Economics

This paper uses the particular features of the tax-sharing regime Coparticipación Federal de Impuestos and the fact that some provinces earn hydrocarbon royalties to investigate public expenditures and debt at the subnational level in Argentina.We obtain that facing a one peso increase in intergovernmental transfers, provinces spend on average 36 cents in public expenditures with no changes in public debt. On the other hand, when royalties increase one peso, 59 cents are used to pay back public debt while public expenditures are not affected. These results, which are robust to many different specifications of the basic regressions, suggest a non-negligeable expenditure/debt smoothing behavior of Argentine provinces.


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