Fiscal federalism in Brazil: an empirical investigation

Resumo

The paper addresses two aspects of fiscal federalism in Brazil. First, one considers the measurement of tax revenue centralization during the period 1979-2000 taking as reference "composite units" of analysis (that combine state and municipal revenues in each state) and the federal government. For that purpose one calculates Theil's entropy indexes that were decomposed in terms of inter-regions and intra-regions components. The analysis, as applied before and after transfers, indicated that centralization presents a certain reduction over time that is largely associated with the reduction of concentration among regions for the case of post-transfer data. Second, the determinants of tax centralization at state level were econometrically investigated for the 1985-99 period. A set of variables related to gains of decentralization such as population, area, degree of urbanization, real per capita GDP and other control variables were considered. The results obtained from panel data techniques were not strong as a previous study developed for the U.S.A., and therefore arguments that essentially relate to scale aspects appear to provide an incomplete explanation for tax centralization in developing countries like Brazil.