Three essays in public finance

Ayala Garcia, Jhorland

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https://hdl.handle.net/2142/110645 Copy

Description

Title

Three essays in public finance

Author(s)

Ayala Garcia, Jhorland

Issue Date

2021-04-08

Director of Research (if dissertation) or Advisor (if thesis)

Dall’Erba, Sandy

Doctoral Committee Chair(s)

Dall’Erba, Sandy

Committee Member(s)

• Ridley, William Clifton
• Xu, Yilan
• Sanchez Torres, Fabio
• Herrera Almanza, Catalina
• Borsky, Stefan

Department of Study

Agr & Consumer Economics

Discipline

Agricultural & Applied Econ

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

Ph.D.

Degree Level

Dissertation

Keyword(s)

• public finances
• Colombia
• expenditure efficiency
• natural disasters
• tax capacity

Abstract

Local governments in developing countries usually face significant constraints on fiscal resources' availability to provide goods and services. They have low-quality institutions that hinder their ability to collect taxes and to spend resources efficiently. They are also more vulnerable to suffer natural disasters and their consequences. In this dissertation, I study the expenditure efficiency and the tax capacity of the local governments in Colombia. In Chapter 1, I explore the relationship between revenue shocks and expenditure efficiency. Using a panel of Colombian municipalities over 2003-2011, I use a two-step procedure to estimate the effect of natural resource revenue on municipal efficiency. First, the technical efficiency of local governments is calculated through a robust non-parametric method. These estimates are then used in a second step to evaluate how the local government’s efficiency varies with exogenous variation in royalties. The results indicate that royalties reduce efficiency in providing education and health care services, offering evidence of one of the natural resource curse mechanisms. In Chapter 2, I study the impact of preemptive investment against natural disasters on the future occurrence of landslides and the losses associated with it. Based on a panel of 746 Colombian municipalities with medium and high risk of landslides and an instrumental variable approach, the results show that preemptive public investment can reduce the number of landslides, the number of people who die, are injured, or disappear after a landslide, as well as the number of people affected. However, I do not find it has any effect on the number of houses destroyed. The results reveal that local governments focus their preventive measures on saving the lives and the physical integrity of their citizens, but they pay less attention to the direct market losses of natural disasters. Finally, Chapter 3 studies the impact of extreme weather events on the local tax revenue across Colombian municipalities. This chapter follows a two-step approach to evaluate how a municipality’s tax revenue depends on natural disasters taking place both locally and in its trade partners. In the first step, I estimate a gravity model of bilateral trade and construct a trade flow matrix allowing us to measure the strength of the economic relationships between cities. To do so, this chapter constructs a novel dataset describing the inter-city trade flows for road transported goods in Colombia for the period 2015–2019. In the second step, the results reveal that natural disasters in the destination cities increase the tax revenue in the origin city. The findings in this dissertation provide information that can be used in the design of a more efficient and equitable system of transfers to subnational governments that consider the externalities of natural disasters, as well as a support for more resources to reduce the negative and increasing consequences of climate change.

Graduation Semester

2021-05

Type of Resource

Thesis

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http://hdl.handle.net/2142/110645

Copyright and License Information

Copyright 2021 Jhorland Ayala Garcia

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