The Fiscal Responsability Act impact on the components of the expenditure of the municipalities of Rio Grande do Sul: econometric analysis

Abstract

The paper studies the impact of the Fiscal Responsibility Act on the expenditures ranked by category and economic function regarding the municipalities of Rio Grande do Sul from 1997 to 2004—four years before and four years after the ruling of the Act. Furthermore, the study encompasses political variables (competition for spots in the Legislative, party fragmentation and constituency participation) and their impact on the components of the public expenditure. The results achieved for the dependent variables ranked by function presented negative coefficients due to the Fiscal Responsibility Act. As to the expenditure by economic category, the results show a positive coefficient for expenditure on personnel. And, as expected, the Fiscal Responsibility Act (FRA) had a negative impact on the total budgetary expenditure and a positive impact on the surplus, meeting the fiscal and budgetary balance of the mentioned legislation. However, this represented a decline in social, capital and infrastructure expenditures. Key words: Fiscal Responsibility Act; public finances; municipalities of Rio Grande do Sul.