Effect of Intergovernmental Transfers on Income and Poverty Rates: Evidence from the Philippines

IUJ Research Institute working paper No. EMS-2022-06

53 Pages Posted: 16 Sep 2022 Last revised: 24 Oct 2022

See all articles by Cheng-Tao Tang

Cheng-Tao Tang

International University of Japan

Chun Yee Wong

International University of Japan

Orelie Delas Alas

affiliation not provided to SSRN

Date Written: August 1, 2022

Abstract

This study investigates the effects of intergovernmental transfers on the development outcomes by exploiting a formula-based transfer scheme among municipalities and cities in the Philippines. The results suggest that the household disposable income per capita increases by 9.6% in the long run as a result of extra transfers of 1,000 Philippine pesos per capita in the Philippine local governments. However, the poverty rate has increased by approximately five percentage points in the long run. The income gains, associated with higher poverty rates, mainly occur in small and less-developed local governments (i.e., municipalities). Furthermore, there is a large stimulatory effect on local spending and a small effect on local tax revenue reduction due to extra grant transfers.

Keywords: Intergovernmental transfer, income, poverty, instrumental variable, the Philippines

JEL Classification: C26, H71, H72, H75, I32, O15

Suggested Citation

Tang, Cheng-Tao and Wong, Chun Yee and Delas Alas, Orelie, Effect of Intergovernmental Transfers on Income and Poverty Rates: Evidence from the Philippines (August 1, 2022). IUJ Research Institute working paper No. EMS-2022-06, Available at SSRN: https://ssrn.com/abstract=4204103 or http://dx.doi.org/10.2139/ssrn.4204103

Cheng-Tao Tang (Contact Author)

International University of Japan ( email )

777 Kokusai-Cho
Minami Uonuma Shi, Niigata-ken 949-7277
Japan
+81 25-779-1508 (Phone)

Chun Yee Wong

International University of Japan

Yamato-machi
Niigata-ken 949-7277
United States

Orelie Delas Alas

affiliation not provided to SSRN

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