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Study of the flypaper effect of specific-purpose nonmatching grants: Impact of the Fiscal Responsibility Law on health spending of brazilian states.

Grant number: 11/15221-7
Support Opportunities:Scholarships in Brazil - Master
Effective date (Start): March 01, 2012
Effective date (End): December 31, 2012
Field of knowledge:Applied Social Sciences - Economics
Principal Investigator:Fabiana Fontes Rocha
Grantee:Fernando Joao Alexandre Parmagnani
Host Institution: Faculdade de Economia, Administração e Contabilidade (FEA). Universidade de São Paulo (USP). São Paulo , SP, Brazil


The flypaper effect, one of the distortions caused by the grants system, such that grants resources have a more stimulating effect on spending of local governments than an equivalent increase in private income of the residents in these localities, is one of the most discussed topics in fiscal federalism literature. However, literature traditionally restricted to evaluate the impact of general-purpose nonmatching transfers. In this work we intend to extend the discussion to the case of specific-purpose nonmatching grants, analyzing their impact on health expenditures of the Brazilian states. This analysis raises a further question: in addition to the expansive effect on spending is expected a substitution effect, to the extent that local governments may not fully comply with the incentive of the federal government and to allocate part of the amount of grants to other purposes. We aim to also check whether these effects are different in periods of soft budget constraint and in periods of hard budget constraint, checking for changes in these effects with the advent of the Fiscal Responsibility Law.

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Academic Publications
(References retrieved automatically from State of São Paulo Research Institutions)
PARMAGNANI, Fernando Joao Alexandre. Flypaper effect for different levels of health expenditures on Brazilian municipalities: assessment of the asymmetry of the impacts of conditional and unconditional transfers. 2013. Master's Dissertation - Universidade de São Paulo (USP). Faculdade de Economia, Administração e Contabilidade (FEA/SBD) São Paulo.

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