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National or political cake?: the political economy of intergovernmental transfers in Nigeria

Research output: Working paper

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Abstract

Analysing the effect of opportunistic fiscal transfers on the electoral fortune of incumbent politicians can be very difficult due to problems of endogeneity. In this paper, we use oil windfalls as an exogenous variation in the political discretion an incumbent government can exert in rule-based transfers. Exploiting within-state variation between 2007 and 2015 in Nigeria, an increase in VAT transfers induced by higher oil windfalls is found to improve the electoral fortune of an incumbent government. Our results question the role of rule-based transfers as an efficient institutional arrangement in resource-abundant countries.