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Subnational sustainable development: The role of vertical intergovernmental transfers in reaching multidimensional goals

Guerrero, OA; Castañeda, G; Trujillo, G; Hackett, L; Chávez-Juárez, F; (2021) Subnational sustainable development: The role of vertical intergovernmental transfers in reaching multidimensional goals. Socio-Economic Planning Sciences , Article 101155. 10.1016/j.seps.2021.101155. Green open access

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Abstract

Achieving sustainable development hinges on two critical factors: the subnational implementation of public policies and the efficient allocation of resources across regions through vertical intergovernmental transfers. We introduce a framework that links these two mechanisms for analyzing the impact of reallocating federal transfers in the presence of regional heterogeneity from development indicators, budget sizes, expenditure returns, and long-term structural factors. Our study focuses on the case of Mexico and its 32 states. Using an agent-based computational model, we estimate the development gaps that will remain by the year 2030, and characterize their sensitivity to changes in the states’ budget sizes. Then, we estimate the optimal distribution of federal transfers to minimize these gaps. Crucially, these distributions depend on the specific development objectives set by the national government, and by various interdependencies between the heterogeneous qualities of the states. This work sheds new light on the complex problem of budgeting for the Sustainable Development Goals at the subnational level, and it is especially relevant for the study of fiscal decentralization from the expenditure point of view.

Type: Article
Title: Subnational sustainable development: The role of vertical intergovernmental transfers in reaching multidimensional goals
Open access status: An open access version is available from UCL Discovery
DOI: 10.1016/j.seps.2021.101155
Publisher version: https://doi.org/10.1016/j.seps.2021.101155
Language: English
Additional information: © 2021 Published by Elsevier Ltd. This is an open access article under the CC BY 4.0 license Attribution 4.0 International (https://creativecommons.org/licenses/by/4.0/)
Keywords: Subnational development, SDGs, State finances, Fiscal federalism, Sustainability, Policy priorities, Agent-based model
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/10136732
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