Vertical transfers and the appropriation of resources by the bureaucracy: the case of Brazilian state governments
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2006
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The Brazilian grant system was built by the federal government aiming to reduce economic and social inequalities in the federation, by transferring income from rich states to poor states. However, due to the lack of control and mechanisms for assessing the use of this public resource, these transfers may be appropriated by the bureaucracy as wage increases, for example. In order to observe this appropriation, we use the wage differential between the public and private sector in the states as a proxy, which is calculated using the technique developed by Oaxaca (1973). We do not use the ratio between wage expenses and total current expenses as proxy, because the results of this measure show no significant differences between rich and poor states. Our initial estimation was made with yearly panel data from 1995 to 2004, using the least squares dummy variables method (LSDV).