Are national transfers crowding out provincial tax revenues in Argentina?

Abstract

Recent papers focused on the problem of weak fiscal incentives arising from imperfect interjurisdictonal arrangements which in turn distorted the fiscal federal scenario, as shared revenues dwindled following a subnational tax collection ́s improvement. Verification of similar hypotheses gathers interest in Argentina, given both discretionary transfers ́ incidence in provincial budgets and the stagnation shown by provincial tax collections. The econometric analysis carried out with a panel data model yielded evidences of crowding out effects whose magnitude was smaller than expected; nevertheless, other costs should be added to financial autonomy loss due to discretionary transfers, as for instance a greater provincial dependency from the central government.