Multi-level government structures in Brazil: the relationship between intergovernmental transfers and a reduction in regional inequalities in the state of Paraná

Abstract

The objective of this article is to analyze the effects on the growth rate of development in municipalities in the state of Paraná exercised by the degree of dependence on intergovernmental transfers represented by the Municipal Participation Fund (MPF), as well as by investment expenses. Hence, we have used an econometric regression model with the Ordinary Least Squares (OLS) method. The sample is composed of 349 municipalities in Paraná from 2002 to 2013. The results have indicated a positive relationship between the degree to which local government budgets depend on the MPF and the growth rate of the development index, I.e., an increase in dependence on transfers stimulates the development process in municipalities in Paraná. Finally, it may be understood that applying mechanisms to coordinate actions among the different levels of government constitutes an important role in enabling the process of reducing inter-municipal inequalities.

Keywords:
intergovernmental transfers; Municipal Participation Fund; degree of dependence; multilevel government; municipalities in Paraná