How the cake is distributed : the case of Portuguese decentralized grants

Abstract

This paper will discuss how the distribution of decentralized grants for Portuguese municipalities affects the evolution of the total amounts given by the Portuguese government to Portuguese municipalities. After a review of the literature I discuss a model based on a Bergson – Samuelson function. I used official data (from Portuguese Budget Reports) since 1982 for studying the decentralized grants. I also regress on other Portuguese time series in order to control for the effect of inequality series. Applying cointegration techniques and testing the causality direction, I conclude that there is a statistical validation that, as the distribution becomes more unequal, the total amounts of the transferred grants decrease.