EFFECT OF REGIONAL DIFFERENCES ON FISCAL SITUATION OF THE MUNICIPALITIES IN MINAS GERAIS IN THE PERIOD FROM 2006 TO 2016

Abstract

Responsible Fiscal Management, established by the Fiscal Responsibility Law, was essential due to imbalances in public management and to the lack of control over public spending. Although the Fiscal Responsibility Law was created with the purpose of controlling public expenditures and debts and must be observed by all municipalities, given regional, economic, institutional, cultural and operational characteristics that are different among them, part of them has been finding it difficult to meet the dictates of the Fiscal Responsibility Law. Given the above, this research sought to analyze the effect of regional differences on the fiscal situation of municipalities in Minas Gerais, from 2006 to 2016. For this purpose, a dynamic panel data model was used, whose proxy for the fiscal situation was the Fiscal Management Index, proposed by the Federation of Industry of the State of Rio de Janeiro (Firjan), and regional differences were captured by the use of regional dummies. From the estimation of the proposed model, it was found that the fact that a municipality belongs to the North and Jequitinhonha/Mucuri regions, considered to be underdeveloped, makes its fiscal situation worse compared to the results achieved by the municipalities of the Central region, evidencing that different factors among regions affect the fiscal results of public entities.