CoChat
Sign Up
Cited by 1Local Government Finance and DecentralizationTaxation and Compliance StudiesFiscal Policies and Political Economy

Losing to Gain: Revenue Shortfalls and Fiscal Capacity in Brazil

Open access
Ferraz, Claudio, Foremny, Dirk, Santini, Juan Francisco·2024·National Bureau of Economic Research
DOI 10.3386/w32440
Open this paper in CoChat — free account

Abstract

This paper investigates how shocks to non-tax revenues impact tax collection in Brazilian municipalities, exploiting an exogenous shift in intergovernmental transfers driven by population updates.Our analysis reveals asymmetric effects of shocks: revenue gains lead to increased spending without tax reductions, while losses in transfers prompt investments in fiscal capacity and boost tax revenues.Enhancing fiscal capacity entails adjusting tax bureaucrat payments, improving property registries, and cracking down on delinquency, with heterogeneous responses based on political competition and the educational levels of local leaders and the bureaucracy.These findings emphasize the importance of rules that reduce the reliance on non-tax revenues and promote effective tax collection.

AI snapshot

Written from the paper’s full text.

TL;DR

Exploiting exogenous changes in Brazil’s formula-based intergovernmental transfers after the 2007 population count, the paper finds asymmetric fiscal responses: municipalities that lose transfers increase tax revenues to nearly offset the loss, while municipalities that gain transfers increase spending without cutting taxes. The tax response operates through investments in fiscal capacity, especially targeting delinquency, adopting property price registers, and increasing tax auditor pay, with stronger effects where political competition and education are higher.

Key findings

  • Negative transfer shocks: municipalities moved to lower population brackets saw a 9% reduction in transfers (about R$ 700,000; R$ 40 per capita). IV estimates show a R$ 1 loss in transfers is offset by R$ 0.97 in additional tax revenues, an approximately 43% increase relative to pre-shock tax revenues. Positive shocks: transfers rose 18% (about R$ 1.3 million; R$ 86 per capita), but tax revenues showed a precisely estimated zero effect while spending increased.
  • Mechanisms: a R$ 1 transfer loss predicts R$ 0.158 more IPTU, R$ 0.185 more ITBI, R$ 0.511 more ISS, and R$ 0.109 more fees; IRRF is insignificant. Municipalities with a larger initial property/service tax base were more successful at raising taxes. Negative shocks increased the probability of using a property price register by about 9 percentage points (12%) and increased the tax-worker wage bill by about R$ 0.016 per R$ 1 transfer loss (around 47%), with no clear effect on hiring or number of tax workers.
  • Heterogeneity: tax revenue increases after negative shocks are stronger in municipalities with higher political competition and with college-educated mayors and bureaucracies. The paper finds no significant differences by mayoral term limits, inequality, or labor-market informality.

Methods

  • Difference-in-differences event-study and 2SLS design using the 2007 population count as an exogenous shock to FPM transfers. Treatment municipalities crossed a population bracket in 2008 and received different transfers; control municipalities had not crossed a threshold since 2002. Negative and positive shocks are estimated separately. Analysis covers 2005–2012, with about 2,632 municipalities in the negative-shock sample and 2,588 in the positive-shock sample.
  • Data combine FINBRA municipal finances, IBGE/TCU population estimates and FPM coefficients, MUNIC tax infrastructure surveys, RAIS employer-employee records for tax workers, and TSE electoral data. Outcomes are in millions of 2012 Brazilian Reais. Specifications include municipality, year, and cutoff-year fixed effects, a jumps trend, and standard errors two-way clustered by micro-region and state-by-year.
  • Exogeneity checks include showing no serial correlation between the 2007 and 2001 population updates and a linear probability model indicating that most observables do not strongly predict treatment status.

Limitations

  • The paper states that comprehensive taxpayer compliance data are unavailable, that it cannot rule out tax rate adjustments (though qualitative evidence suggests rate increases are politically costly and rarely used), and that it cannot precisely test explanations for why municipalities did not invest in fiscal capacity before the shock. Tax infrastructure data are available only for 2006 and 2009.
  • The paper notes that some characteristics used for heterogeneous effects are not randomly assigned; when all characteristics are allowed to vary jointly, some results weaken, though electoral competition and mayor education remain important.
  • Evident from the text: budget data are self-reported and contain outliers, which the authors address by interpolating extreme values and showing robustness without correction; treatment is intention-to-treat, holding treatment status fixed even if municipalities later jump back across brackets.

Model-written summary. Check it against the paper before relying on it.

Integrity signals

Registry

Crossref · 10.3386/w32440

Cites

54 of 54 references verified0 citation errors · 0 not checkable

Statistics

Nothing to recompute.

Claims the paper makes

0 of 19 cited sources checked · 0 supported · 0 flagged

  • Findingown data

    Municipalities facing adverse shocks experience a significant increase in tax revenues in subsequent periods, nearly offsetting the losses through local tax collection efforts.

    “Municipalities facing adverse shocks experience a significant increase in tax revenues in subsequent periods, nearly offsetting the losses through local tax collection efforts.”
    Quote in the paperSubstantial claim
  • Findingown data

    Local governments in Brazil that receive larger intergovernmental transfers tend to collect lower taxes.

    “local governments in Brazil that receive larger intergovernmental transfers tend to collect lower taxes”
    Quote in the paperSubstantial claim
  • Findingown data

    Revenue gains lead to increased spending without tax reductions.

    “revenue gains lead to increased spending without tax reductions”
    Quote in the paperSubstantial claim
  • Findingown data

    Population updates affect the value of transfers received by municipalities after the shock.

    “We begin our analysis by showing that population updates affect the value of transfers received by municipalities after the shock.”
    Quote in the paperSubstantial claim
  • Findingown data

    On average, municipalities that move to lower population brackets experience a 9 percent reduction in transfers compared to those that remain in the same brackets.

    “On average, municipalities that move to lower population brackets experience a 9 percent reduction in transfers compared to those that remain in the same brackets.”
    Quote in the paperSubstantial claim
  • May combine two claims. 39
  • Classified as probably not a substantial claim. 34
  • The quote only partly states this claim. 4

  • May combine two claims.

    Findingown data

    Event-study figures reveal a sharp and sudden decline (rise) in intergovernmental transfers for municipalities hit by a negative (positive) shock starting in 2008, with no observable trends before that.

    “Event-study figures reveal a sharp and sudden decline (rise) in intergovernmental transfers for municipalities hit by a negative (positive) shock starting in 2008, the year following the population count, with no observable trends before that.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Findingown data

    Losses in transfers prompt investments in fiscal capacity and boost tax revenues.

    “losses in transfers prompt investments in fiscal capacity and boost tax revenues”
    Quote in the paperSubstantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Findingown data

    Almost 50 percent of mayors have a college degree.

    “almost 50 percent of them have a college degree”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Findingreasoning

    Under the definition used, 1.04 percent of tax revenue observations are classified as outliers.

    “Under this definition, for example, 1.04 percent of tax revenue observations are classified as outliers.”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Findingown data

    78 percent of municipalities report a property price register that values legal properties.

    “78 percent a property price register that values legal properties”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Findingown data

    The average number of tax workers per municipality is around 2.3 at the intensive margin.

    “The intensive margin is around 2.3”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Findingown data

    A negative shock results in a surprisingly significant increase in tax revenues, which almost offsets the loss in FPM formula transfers.

    “Panel A presents negative shock results and reports a surprisingly significant increase in tax revenues, which almost offsets the loss in the FPM formula transfers.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Findingown data

    75 percent of municipalities had a property price register (79 percent utilizing IT-based).

    “In contrast, 75 percent had a property price register (79 percent utilizing IT-based)”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Findingown data

    The average municipality has less than 3 candidates in mayoral elections.

    “less than 3 candidates in mayoral elections”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Findingown data

    10 percent of mayors are affiliated with the same political party as the president at the time (PT-Labor Party).

    “and 10 percent are affiliated with the same political party as the president at the time (PT-Labor Party).”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Findingown data

    For the negative shock, only the presence of a municipal radio station and a zoning law decrease slightly the probability of receiving it.

    “For the negative shock, only the presence of a municipal radio station and a zoning law decrease slightly the probability of receiving it.”
    Quote in the paperSubstantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Findingnone given

    Apart from some specifications that include combinations of state-year fixed effects, most estimated coefficients are significant at (or just above) 10 percent.

    “Apart from some specifications that include combinations of state-year fixed effects, most of the estimated coefficients are significant at (or just above) 10 percent.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Findingown data

    Most other variables do not show significant correlations with the treatment indicators or are small in magnitude.

    “more relevant for our design is that most other variables do not show significant correlations with the treatment indicators or are small in magnitude.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Findingown data

    Significant determinants of the positive shock are the mayor's age, the share of adults with college degrees, and the tax share.

    “Significant determinants of the positive shock are the mayor's age, the share of adults with college degrees, and the tax share.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Findingown data

    In both municipalities with and without a term-limited mayor, mayors collect more taxes.

    “In both types of municipalities, mayors collect more taxes.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Findingown data

    86 percent of municipalities had a provider register (85 percent utilizing IT-based).

    “and 86 percent had a provider register (85 percent utilizing IT-based).”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Findingown data

    The average municipality has about 18,000 inhabitants.

    “and about 18,000 inhabitants.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Findingown data

    There is no strong evidence that political alignment (with federal or state government), electoral term, education, gender, or party affiliation of the mayor are correlated with the positive or negative shock.

    “We do not find strong evidence that political alignment (with both the federal or state government), electoral term, education, gender, or party affiliation of the mayor are correlated with the positive or negative shock.”
    Quote in the paperSubstantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Findingown data

    Between 2006 and 2009, approximately 95 percent of municipalities in the sample report a real estate cadastre that covers legal properties.

    “Between 2006 and 2009, the years for which we have information, approximately 95 percent of municipalities in our sample report a real estate cadastre that covers legal properties”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Findingown data

    In 2008, 443 municipalities were switched to a lower population bracket while 403 municipalities changed to a higher bracket.

    “In 2008, reflecting the new population figures from the 2007 count, 443 municipalities were switched to a lower population bracket while 403 municipalities changed to a higher bracket”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Findingnone given

    During non-census years, an average of 22 municipalities move to lower brackets and 190 to higher.

    “In contrast, during non-census years, an average of 22 municipalities move to lower brackets and 190 to higher.”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Findingown data

    The FPM formula transfer is about a third of total revenues in the sample.

    “Furthermore, the breakdown of revenues highlights the importance of the FPM formula transfer, which is about a third of total revenues.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Findingown data

    The positive-shock increment corresponds to a per capita rise of R$ 86, representing 5.9 percent of pre-shock total revenues, or 18 percent of pre-shock transfers.

    “This increment corresponds to a per capita rise of R$ 86-representing 5.9 percent of pre-shock total revenues-or 18 percent of pre-shock transfers.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Findingreasoning

    The negative-shock reduction translates to a per capita decrease of R$ 40, equivalent to 2.8 percent of pre-shock total revenues, or approximately 9 percent of pre-shock transfers.

    “This reduction translates to a per capita decrease of R$ 40-equivalent to 2.8 percent of pre-shock total revenues-or approximately 9 percent of pre-shock transfers.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Findingown data

    A shift in FPM revenues occurred in 2008, coinciding with the implementation of the population update, with no discernible trends before the event.

    “These figures distinctly highlight the shift in FPM revenues occurring in 2008, coinciding with the implementation of the population update, with no discernible trends observed before the event.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Findingown data

    For the real estate transaction tax, the results show a change of R$ 0.19, accounting for approximately 93 percent of 2007 revenues, but remaining at low absolute levels given total tax revenues.

    “As for the real estate transaction tax, the results show a more considerable change of R$ 0.19, accounting for approximately 93 percent of the 2007 revenues, but remains at low absolute levels given the total tax revenues.”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Findingown data

    Approximately 58 percent of mayors are in their first term in office.

    “approximately 58 percent are in their first term in office”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Findingown data

    On average, a reduction of R$ 1 in transfers predicts a R$ 0.16 increase in property tax revenues, representing a 27 percent rise compared to pre-shock levels.

    “On average, a reduction of R$ 1 in transfers predicts R$ 0.16 increase in property tax revenues, representing a 27 percent rise compared to pre-shock levels.”
    Quote in the paperSubstantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Findingown data

    The average municipality has 12 percent of its local bureaucrats with higher education.

    “The average municipality has 12 percent of its local bureaucrats with higher education”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Findingown data

    A larger projected pre-census population in 2006 and a population growth rate decreased the probability of having a positive shock and increased the probability of receiving a negative shock.

    “We find that a larger (projected) pre-census population in 2006 and a population growth rate decreased the probability of having a positive shock and increased the probability of receiving a negative shock.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Findingnone given

    Before the revenue shock, approximately 95 percent of municipalities had a real estate cadastre, most utilizing IT-based technology (92 percent).

    “Before the revenue shock, approximately 95 percent of municipalities had a real estate cadastre, most utilizing IT-based technology (92 percent).”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Findingown data

    Mayors are on average 49 years old.

    “We observe that mayors are, on average, 49 years old”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Findingown data

    Point estimates for the wage bill are significant at (or just above) 10 percent for most post-shock years but are generally imprecise for the number of tax workers.

    “Point estimates for the wage bill are significant at (or just above) 10 percent for most post-shock years but are generally imprecise for the number of tax workers.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Findingown data

    In the event study, total tax revenues after a negative shock increase in impact during the year after the shock and further increase two years after.

    “Results indicate an increase in impact during the year after the shock came into effect, and a further increase two years after.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Findingown data

    The federal transfer FPM is the most critical source of local revenues, accounting on average for more than 35 percent, followed by state transfers (24%) and other federal transfers (13%).

    “The federal transfer FPM is the most critical source of local revenues, accounting on average for more than 35 percent, followed by state transfers and other federal transfers, representing on average 24 percent and 13 percent, respectively.”
    Quote in the paperNot a substantial claim

  • The quote only partly states this claim.

    Findingown data

    Taxes represent a much smaller share of total revenues than FPM transfers.

    “While taxes represent a much smaller share of total revenues, we observe substantial variation in this variable.”
    Quote in the paperNot a substantial claim

  • The quote only partly states this claim.

    Findingown data

    The effect of the FPM formula transfer shock on reported tax revenues is larger in municipalities whose post-shock bureaucracy has an above-median share of college-educated employees.

    “Transfer (FPM) X Bureaucrats College 2.135** -0.047”
    Quote in the paperNot a substantial claim
    • Rests on an assumption: The 2008 population bracket update is as-good-as-random with respect to municipal fiscal outcomes, with no sorting or manipulation of population counts around the thresholds.
    • Rests on an assumption: The population bracket update affects municipal tax outcomes only through its effect on FPM formula transfers (exclusion restriction).
    • Rests on an assumption: In the absence of the population bracket shock, treated and control municipalities would have followed parallel trends in the outcomes.

  • May combine two claims.

    Findingown data

    The positive population bracket update increased reported total expenditures and total revenues.

    “Reduced Form Shock (positive) 1.933*** 2.362*** 0.404”
    Quote in the paperSubstantial claim
    • Rests on an assumption: The 2008 population bracket update is as-good-as-random with respect to municipal fiscal outcomes, with no sorting or manipulation of population counts around the thresholds.
    • Rests on an assumption: The population bracket update affects municipal tax outcomes only through its effect on FPM formula transfers (exclusion restriction).
    • Rests on an assumption: In the absence of the population bracket shock, treated and control municipalities would have followed parallel trends in the outcomes.

  • Probably not a substantial claim: may not pass S1 (asserted), S3 (load-bearing). The quote only partly states this claim.

    Findingown data

    The negative population bracket update had no statistically significant effect on the reported number of tax workers.

    “Shock (negative) 0.379 0.362 0.361 0.267”
    Quote in the paperNot a substantial claim
    • Rests on an assumption: The 2008 population bracket update is as-good-as-random with respect to municipal fiscal outcomes, with no sorting or manipulation of population counts around the thresholds.
    • Rests on an assumption: The population bracket update affects municipal tax outcomes only through its effect on FPM formula transfers (exclusion restriction).
    • Rests on an assumption: In the absence of the population bracket shock, treated and control municipalities would have followed parallel trends in the outcomes.

  • Classified as probably not a substantial claim.

    Study design and conductnone given

    The transfer shock is instrumented with the interaction between the treatment indicator and a dummy variable indicating the post-updated period.

    “We instrument the transfer shock with the interaction between the treatment indicator and a dummy variable indicating the post-updated period.”
    Quote in the paperSubstantial claim

  • Classified as probably not a substantial claim.

    Premisenone given

    In between census years, formula-based transfers are determined using projected population figures.

    “In between census years, formula-based transfers are determined using projected population figures.”
    Quote in the paperSubstantial claim

  • Classified as probably not a substantial claim. May combine two claims.

    Interpretationown data

    The findings suggest an upward adjustment of salaries or, more generally, monetary incentives to tax bureaucrats to improve tax enforcement.

    “The findings suggest an upward adjustment of salaries or, more generally, monetary incentives to tax bureaucrats to improve tax enforcement.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Interpretationreasoning

    Municipalities affected negatively by the population update invest in fiscal capacity through monetary compensations to their tax employees, by adopting a system to assess the market value of local properties, and by cracking down on registered tax evaders.

    “To sum up, municipalities affected negatively by the population update invest in fiscal capacity through monetary compensations to their tax employees, by adopting a system to assess the market value of local properties, and by cracking down on registered tax evaders.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Study design and conductown data

    The findings remain robust but become less precise when outliers are retained.

    “The Appendix reports all results without adjusting for outliers, showing that the findings remain robust but become less precise when these outliers are retained.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Study design and conductown data

    Wage bill IV estimates are robust to different combinations of fixed effects and control variables, to clustering standard errors at different levels, and to various samples of municipalities.

    “As before, we show the robustness of the IV estimates to different combinations of fixed effects and control variables, to clustering standard errors at different levels, and to various samples of municipalities.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Study design and conductown data

    The event study results show no distinct trends before the shock and a rapid increase after 2008.

    “The event study results (Figure 7) show no distinct trends before the shock and a rapid increase after 2008.”
    Quote in the paperSubstantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Premisecitation

    A growing literature on fiscal capacity emphasizes the role played by political incentives, the quality of institutions, and the social structure.

    “A growing literature on fiscal capacity emphasizes the role played by political incentives, the quality of institutions, and the social structure (Besley & Persson, 2011, 2013).”
    Quote in the paperNot a substantial claim0 of 1 sources checked
    • cites Besley & Persson, 2011, 2013

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Premisecitation

    During the primary years of construction, taxes levied on paving services increased ISS revenues to an average of 2 million Reais.

    “During the primary years of construction, however, the taxes levied on paving services increased the ISS revenues to an average of 2 million Reais (Ferrer, 2013).”
    Quote in the paperNot a substantial claim0 of 1 sources checked
    • cites Ferrer, 2013

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Premisecitation

    The municipality of Manoel Urbano, from Acre, had a massive increase in local tax revenues due to the construction of the BR-364 national road.

    “For instance, the municipality of Manoel Urbano, from the state of Acre, had a massive increase in local tax revenues due to the construction of the BR-364 national road.”
    Quote in the paperNot a substantial claim0 of 1 sources checked
    • cites Ferrer, 2013

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Interpretationown data

    The results support the previous finding that electoral competition and the education level of the mayor seem to be essential elements behind the increase in after-shock tax revenues.

    “However, they support the previous finding that electoral competition and the education level of the mayor seem to be essential elements behind the increase in after-shock tax revenues.”
    Quote in the paperSubstantial claim

  • Probably not a substantial claim: may not pass S2 (checkable), S3 (load-bearing).

    Premisecitation

    From a representative citizen perspective, the increase in transfers should partially be rebated to citizens through tax decreases.

    “From a representative citizen perspective, the increase in transfers should partially be rebated to citizens through tax decreases (Inman, 2008)”
    Quote in the paperNot a substantial claim0 of 1 sources checked
    • cites Inman, 2008

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Interpretationown data

    Municipalities that lose transfers invest in fiscal capacity and boost tax revenues.

    “In contrast, municipalities that lose transfers invest in fiscal capacity and boost tax revenues.”
    Quote in the paperSubstantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Premisecitation

    Several empirical studies document spending increases of similar magnitude as the transfer windfall.

    “but several empirical studies document spending increases (see Dahlberg et al. 2008 for an example) of similar magnitude as the transfer windfall.”
    Quote in the paperNot a substantial claim0 of 1 sources checked
    • cites Dahlberg et al. 2008

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Interpretationreasoning

    The IRRF result is expected since the local jurisdiction has no control over this tax instrument.

    “This outcome is expected since the local jurisdiction has no control over this tax instrument.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Study design and conductown data

    First-stage effects remain qualitatively consistent across specifications, with minimal changes in magnitudes.

    “Despite these adjustments, the qualitative findings remain consistent across all specifications, with minimal changes observed in the magnitudes of the coefficients.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Interpretationreasoning

    The observed increase in revenue follows a gradual pattern, suggesting potential growth in the tax base rather than rate effects.

    “The observed increase in revenue follows a gradual pattern, suggesting potential growth in the tax base rather than rate effects.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Interpretationreasoning

    A significant part of the adjustment in this context occurs through improvements in tax capacity, different from Helm & Stuhler (2023).

    “Different from Helm & Stuhler (2023), who studies German municipalities that are not directly in charge of the administration of local tax bases, a significant part of the adjustment in our context occurs through improvements in tax capacity.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Helm & Stuhler (2023)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Premisecitation

    Before the construction, the average yearly collection of ISS in Manoel Urbano was around 70 thousand Reais.

    “Before the construction, the average yearly collection of tax on services (ISS) was around 70 thousand Reais.”
    Quote in the paperNot a substantial claim0 of 1 sources checked
    • cites Ferrer, 2013

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Study design and conductown data

    Raw data results may appear noisier but on average remain qualitatively and quantitatively unchanged.

    “These figures show that while the results may appear noisier using the raw data, on average, they remain qualitatively and quantitatively unchanged.”
    Quote in the paperNot a substantial claim

  • Classified as probably not a substantial claim.

    Premisecitation

    Crises can serve as catalysts for reforms.

    “crises can serve as catalysts for reforms, as Drazen & Grilli (1993) suggested.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Drazen & Grilli (1993)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • Probably not a substantial claim: may not pass S2 (checkable). May combine two claims.

    Interpretationown data

    Learning how to collect tax revenues and changing the bureaucracy is difficult and costly.

    “Another explanation is that learning how to collect tax revenues and changing the bureaucracy is difficult and costly.”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Study design and conductown data

    The effect of the FPM formula transfer shock on reported adoption of a property price register is estimated using a 2SLS regression model where the FPM formula transfer shock is instrumented with the negative population bracket update.

    “The figure shows robustness for the effect of the FPM formula transfer shock on reported adoption of a property price register using a 2SLS regression model where the FPM formula transfer shock is instrumented with the negative population bracket update.”
    Quote in the paperNot a substantial claim
    • Rests on an assumption: The 2000 census results became available in December 2001, impacting the 2002 FPM transfers, while the 2010 census results were released within the same year, thus affecting the 2011 FPM transfers.

  • Probably not a substantial claim: may not pass S3 (load-bearing). May combine two claims.

    Study design and conductnone given

    Treatment status is defined at the municipality level and is independent of the state in which a municipality is located.

    “Note, however, that treatment status is defined at the municipality level and is independent of the state in which a municipality is located.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Interpretationreasoning

    The increase in overall revenues reported in model 2a is partially attributed to positive changes in other transfers and gradual reshuffling of municipalities back to the pre-shock population bracket.

    “This explains the increase in overall revenues reported in model 2a, which is partially attributed to the positive changes in other transfers and the gradual reshuffling of municipalities back to the pre-shock population bracket (see Appendix TableA.2).”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Study design and conductnone given

    All specifications include cutoff and state fixed effects.

    “All specifications include cutoff and state fixed effects.”
    Quote in the paperNot a substantial claim

  • Classified as probably not a substantial claim.

    Study design and conductnone given

    The 2SLS regressions use the population bracket update as an instrument of the FPM formula transfer shock.

    “The 2SLS regressions use the population bracket update as an instrument of the FPM formula transfer shock.”
    Quote in the paperSubstantial claim
    • Rests on an assumption: The 2000 census results became available in December 2001, impacting the 2002 FPM transfers, while the 2010 census results were released within the same year, thus affecting the 2011 FPM transfers.

  • May combine two claims.

    Premisecitation

    Brazil's property tax rates and relative importance for local revenues are below the average for other Latin American countries.

    “This is below the average for other Latin American countries in terms of rates and relative importance for local revenues(Carvalho Jr, 2006).”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Carvalho Jr, 2006

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • Classified as probably not a substantial claim.

    Study design and conductnone given

    In the 2SLS regressions, the FPM formula transfer shock is instrumented with the negative population bracket update.

    “The 2SLS regressions use the negative population bracket update as an instrument of the FPM formula transfer shock.”
    Quote in the paperSubstantial claim

  • Classified as probably not a substantial claim. May combine two claims.

    Study design and conductnone given

    All specifications include municipality and year fixed effects, and cutoff X year fixed effects.

    “All specifications include municipality and year fixed effects, and cutoff X year fixed effects.”
    Quote in the paperSubstantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Study design and conductnone given

    95% confidence intervals of standard errors clustered at the micro-region level are indicated around the point estimates.

    “95% confidence intervals of standard errors clustered at the micro-region level are indicated around the point estimates.”
    Quote in the paperNot a substantial claim

  • The quote only partly states this claim.

    Study design and conductown data

    The first-stage Kleibergen-Paap rk Wald F-statistics indicate the instrument is not weak (values of 70.4 to 85.1 in the tax-worker specifications).

    “F-statistic (1st Stage) 76.0 82.0 85.1 70.4”
    Quote in the paperSubstantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Study design and conductnone given

    Robust standard errors are two-way clustered by state X year and micro-region level.

    “Robust standard errors, two-way clustered by state X year and micro-region level, in parenthesis.”
    Quote in the paperNot a substantial claim
72 of 72

  • The paper relies on this without support.

    Investments in fiscal capacity made in response to a negative transfer shock will still pay off even if the transfer effect later vanishes due to another bracket shift.

    “We follow this intention-to-treat approach as investments in fiscal capacity will still pay off, even though the effect of an increase or decrease in transfers vanishes due to another shift across population brackets.”

  • The paper relies on this without support.

    The 2007 population count updates and resulting FPM bracket changes were unanticipated by municipal governments.

    “We leverage significant and unexpected changes in intergovernmental transfers resulting from population updates”

  • The authors state this as an assumption.

    The population update is exogenous, i.e., it should not be anticipated by the local administration.

    “The validity of our identification strategy relies on the exogeneity of the population update, i.e., the update should not be anticipated by the local administration.”

  • The authors state this as an assumption.

    Unobservable factors are unlikely to correlate with treatment status.

    “Since this large set of observables does not exhibit strong correlations with treatment status, we assume that unobservable factors are also unlikely to do so.”

  • The paper relies on this without support.

    More than 25 percent of the employed population works informally.

    “and more than 25 percent of the employed population works informally”

  • The paper relies on this without support.

    The capacity of local governments to reduce delinquency rates and increase their tax base depends on local bureaucratic capacity and the motivation of public workers to increase tax collection efforts.

    “The capacity of local governments to reduce delinquency rates and increase their tax base depends on the local bureaucratic capacity and the motivation of public workers to increase tax collection efforts.”

  • The paper relies on this without support.

    In many local governments across Latin America, most spending is earmarked for salaries of public employees and pensions.

    “In many local governments across Latin America, most spending is earmarked for salaries of public employees and pensions.”

  • The paper relies on this without support.

    The 2008 population bracket update is as-good-as-random with respect to municipal fiscal outcomes, with no sorting or manipulation of population counts around the thresholds.

    “The figure shows the scatter plot and linear prediction between the census shock in t (2008) and the previous census shock in 2002 (t-6) after controlling for cutoff and state fixed effects.”

  • The paper relies on this without support.

    The population bracket update affects municipal tax outcomes only through its effect on FPM formula transfers (exclusion restriction).

    “The 2SLS regressions use the negative population bracket update as an instrument of the FPM formula transfer shock.”

  • The paper relies on this without support.

    In the absence of the population bracket shock, treated and control municipalities would have followed parallel trends in the outcomes.

    “Each cell reports the average effect for the entire post-treatment period of a difference-in-difference model.”

  • The paper relies on this without support.

    The 2000 census results became available in December 2001, impacting the 2002 FPM transfers, while the 2010 census results were released within the same year, thus affecting the 2011 FPM transfers.

    “The 2000 census results became available in December 2001, impacting the 2002 FPM transfers, while the 2010 census results were released within the same year, thus affecting the 2011 FPM transfers.”
11 of 11

Cites

Flagged first, then by citations

Research works printed but not linked: 3

  1. ALAN J. AUERBACH, RAJ CHETTY, MARTIN FELDSTEIN, & SAEZ, EMMANUEL (eds), Handbook of Public Economics. Handbook of Public Economics, vol. 5. Elsevier.
  2. DRAZEN, ALLAN, & GRILLI, VITTORIO. 1993. The Benefit of Crises for Economic Reforms. Amer- ican Economic Review, 83(3), 598-607.
  3. HINES, JAMES R., & THALER, RICHARD H. 1995. The Flypaper Effect. Journal of Economic Perspec- tives, 9(4), 217-226.

Cited by

Sorted by citations

Related

Authors
Ferraz, C., Foremny, D., & Santini, J. F.
Affiliations
National Bureau of Economic Research (US)
ORCID
Foremny, Dirk
Venue
National Bureau of Economic Research
Publisher
National Bureau of Economic Research
Published
2024-05
DOI
10.3386/w32440
OpenAlex
W4396849354
Cited by
1
References
43
Citations by year
2026: 1
Type
report
Language
en
Open access
Locations
National Bureau of Economic Research (publishedVersion)
Topics
  • Social Sciences › Political Science and International Relations › Local Government Finance and Decentralization
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Taxation and Compliance Studies
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Fiscal Policies and Political Economy
Keywords
non-tax revenue, fiscal capacity, municipal tax collection, intergovernmental transfers, revenue shortfall, land registry, tax delinquency, political competition

About these checks

Registry, retraction, Cites and statistics results are computed, not judged, with one exception: a printed reference that no index lists is read once by a model before it counts as a citation error. Claims are extracted by a model and kept only when their quote appears verbatim in the text; each cited source is then checked, with a model’s help, for whether it says what the claim relies on. Those verdicts can be wrong — read the claim’s quote and the cited source before relying on one.

Claims read by deepseek-v4.1-flash under definition version 3 (extract-v3) on 2026-11-02.

Classified by jev-1.13-20260917 (gold-guideline-v0.2) on 2026-11-02.

Statistics and arithmetic are recomputed, not judged.

Confidence bands are shown only for fields calibrated on our annotated test set. None is calibrated yet, so no band is shown.

What counts as a claim ›How we measure confidence ›How we check this ›

Are you an author, or do you see a problem with this page? Request a review