Impact of VAT transfers paid by central government to local communities in Morocco: Case of municipalities of the province of TATA and TIZNIT

Abstract

This study attempts to find the impact of municipal budget revenues on the level of budget allocation received from the state, in relation to population size, surface area, and political alignments. The study was conducted by the municipalities of the Souss-Massa-Daraa region, specifically the municipalities of Tata and Tiznit. To do this, using data collected at the level of the aforementioned municipalities, a fixed-effects model and a random-effects panel data model were estimated. The use of fixed effects and random effects models in this study is important because it allows for a more accurate estimation of the impact of the independent variables on the dependent variable. A fixed effects model is used to control for unobserved time-invariant variables that may be affecting the relationship between the independent and dependent variables. A random effects model is used to account for the presence of unobserved variables that vary across time and across units. This research question is relevant because it aims to understand how the resources of municipalities affect the level of budget allocation received from the state. This is important because it helps to understand how municipalities are able to provide public services to their citizens. Additionally, understanding how population size, surface area, and political alignment affect the level of budget allocation received from the state can help policymakers to design policies that better support municipalities. The results of this study showed that, overall, the resources of municipalities, regardless of their functioning or investment, population size, and expenses, have a positive effect on the share of the allocation received from the central government. On the other hand, political alignment does not have an effect on the level of transfers, while the size of the municipal surface area has a negative effect on this share.

Keywords: Transfers, redistribution, municipalities, decentralization

JEL Classification: H20, H50.

Paper type: Empirical research