The territorial fiscal gap in Colombia

Bonet-Morón, Jaime; Ayala-García, Jhorland

The territorial fiscal gap in Colombia

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Documentos de Trabajo Sobre Economía Regional y Urbana ; No. 251

Date published

2017-03-03

Date

2017-03-03

Authors

Bonet-Morón, Jaime
Ayala-García, Jhorland

ISSN

1692-3715

Document language

eng

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Las opiniones contenidas en el presente documento son responsabilidad exclusiva de los autores y no comprometen al Banco de la República ni a su Junta Directiva.

The opinions contained in this document are the sole responsibility of the author and do not commit Banco de la República or its Board of Directors.

Abstract

This paper presents an estimation of expenditure needs and fiscal capacity of Colombia’s municipalities and departments in 2014. We use standard per capita norms to estimate the spending needs and data envelopment analysis for the local fiscal capacity. The results show that: (i) there are high horizontal fiscal disparities in Colombia, with greater incidence in municipalities than in departments; (ii) these disparities favor more developed territories; and (iii) there is evidence of a centerperiphery pattern in the horizontal fiscal disparities, causing central regions of the country to have a lower imbalance between expenditure needs and fiscal capacity. An equalization transfers system is an option for public policy to eliminate these disparities.

JEL Codes

H71 - State and Local Taxation, Subsidies, and Revenue
H73 - Interjurisdictional Differentials and Their Effects
H77 - Intergovernmental Relations; Federalism; Secession
R12 - Size and Spatial Distributions of Regional Economic Activity