The relationship of governmental transfers nature and the fiscal responsibility of brazilian municipal governments

Abstract

Objective: to analyze the relationship between the government transfers nature and the fiscal responsibility of Brazilian municipal governments, from the perspective of Political Cycles. Method: using panel data regression, with pooled effects, we analyzed the behavior of budgetary and electoral factors in 95 large Brazilian municipalities, from 2006 to 2016, with effects on fiscal responsibility, through regression with panel data, with pooled effects. Originality/relevance: according to the theoretical constructs, the problem of fiscal illusion misrepresents the conduct of public budget in relation to taxpayers, which led this study to associate it with fiscal responsibility. Based on this assumption, such a relationship can be strengthened in electoral periods, which led this research to control it. Results: the evidences confirmed that the responsibility in fiscal management is positively influenced by voluntary transfers presence, in view of the requirements linked to their receipt. On the other hand, when transfers are constitutional and therefore obligatory, spaces are allowed for behaviors that are aggressive to fiscal responsibility. In addition, it was found that in election and pre-election years, the manager also exhibits fiscal aggressive behavior. Theoretical/Methodological Contributions: all findings incrementally contribute to the existing literature so far, to confirm the diagnosis and understanding of fiscal illusion problems caused by government transfers, and that is aggravated by observing the Budget Political Cycles, considerably impacting on government fiscal liability.