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This study investigates the impact of political alignment on intergovernmental transfers to the Brazilian unified health system (SUS). The authors analyzed both automatic transfers based on pre-established rules and discretionary transfers, using two criteria of political alignment between mayors and the central government.

For the empirical analysis the authors used regression-discontinuity design (RDD) and the outcomes of close elections between 2001 and 2017.

The results indicate positive and statistically significant effects of party alignment on the two transfer categories, especially discretionary transfers, but also on transfers based on pre-established rules. The effect of direct party alignment, when mayors and the president are from the same party, is greater than that resulting from coalitions established in municipal and federal elections.

The positive effect of party alignment was found both in discretionary transfers (those that do not have previously established rules) and some non-discretionary transfers (although they have previously defined regulations). A part of these regulations depends on production capacity and on taking part in programs promoted by the central government, which may produce entropy in the financing system, and a margin to benefit political allies. In the case of the SUS system, it is possible that this entropy is greater in the basic health care category than in the moderate and high complexity one, allowing a higher margin for discretion in transfers allocated to the former. Stricter rules associated to basic health care transfers would be desirable.

In Brazil, stricter rules and monitoring associated to basic healthcare intergovernmental transfers would be desirable.

The results may inspire some improvement in the mechanisms that govern the distribution of resources to basic healthcare in Brazil, improving social welfare by improving social justice in the distribution of resources to basic healthcare.

The authors does not know any other study about the impact of party alignment on the distribution of intergovernmental transfers to the Brazilian unified health system.

The authors test the effect of expenditure decentralization and fiscal equalization on short- and long-run economic growth and estimate two-step generalized method of moment (GMM) simultaneous equations models, using panel data for China and India for the period 1985 to 2005. The authors estimate two simultaneous equations: a growth equation and equalization equation and find that expenditure decentralization has a negative and statistically significant effect at conventional levels on short-run economic growth for both China and India. However, the authors also find that this result is sensitive to the set of included explanatory variables. This leads the authors to conclude that expenditure decentralization has no effect on short-run economic growth for either country. The authors also find that expenditure decentralization has a positive and statistically significant effect on fiscal equalization for both countries but find no evidence that fiscal equalization affects short-run economic growth for either China or India. In contrast, the authors find that expenditure decentralization has a positive effect on long-run economic growth in the case of India, but not in the case of China. Finally, the authors report evidence that fiscal equalization has no effect on long-run economic growth in the case of China; however, the authors find that equalization has a positive and statistically significant at conventional levels effect on long-run economic growth in India.

The authors estimate two-step GMM simultaneous equations models, using panel data for China and India for the period 1985 to 2005. To examine the effect of fiscal decentralization (FD) policies on economic growth in China and India, the authors estimate two equations: a growth equation and an equalization equation. For the growth equation, the authors adopt a production-function-based model that is widely used in the empirical literature on growth; however, the authors do make some compromises with this specification due to the unavailability of certain data. For the equalization equation, the authors include variables that economic theory and empirical evidence suggest influence fiscal disparities among subnational governments which in turn influence the demand for horizontal fiscal equalization (HFE). To the extent possible, the authors employ the same econometric specification, variable constructions and sample periods for both China and India. The authors believe this strategy provides a more rigorous test of the FD hypothesis.

The authors find that expenditure decentralization has a negative and statistically significant effect at conventional levels on short-run economic growth for both China and India. However, the authors also find that this result is sensitive to the set of included explanatory variables. This leads to conclude that expenditure decentralization has no effect on short-run economic growth for either country. The authors also find that expenditure decentralization has a positive and statistically significant effect on fiscal equalization for both countries but find no evidence that fiscal equalization affects short-run economic growth for either China or India. In contrast, the authors find that expenditure decentralization has a positive effect on long-run economic growth in the case of India, but not in the case of China. Finally, the authors report evidence that fiscal equalization has no effect on long-run economic growth in the case of China; however, the authors find that equalization has a positive and statistically significant at conventional levels effect on long-run economic growth in India.

Due to the importance of FD policies, especially to many developing countries that are currently pursuing decentralization reforms, future research should examine the effect of FD on economic growth for other countries. Furthermore, although it would be difficult to do so, future research should examine whether FD promotes political stability on ethnically diverse countries.

To the best of the authors’ knowledge, no one has examined the effect of FD policies on India's growth experience. What is more is that this is also the first of its kind to have a comprehensive empirical investigation into these two major developing countries with very interesting similarities and differences in FD policies. It is thus of great importance to examine the effect of expenditure decentralization and HFE on economic growth in China and India.