The Effects of Central transfers on Local Own-Revenue: The Case of Morocco

The purpose of this work is to evaluate the effects of transferred central revenues on local own revenues. The nature of these effects remains ambiguous according to theoretical and empirical literature review, especially for developing countries. Indeed, these effects are analyzed in the context of a behavior's imbalance that can be caused by decentralization between local expenditures and their coverage by local own revenues. We are interested in Morocco for the period 2002-2014, taking into consideration all the Moroccan territorial communities grouped by the 16 regions. The effects are analyzed for total own revenue and then for each type of own-revenues and taking into account the endogeneity effect of transfers as a key issue. It is concluded that an increase in transferred central revenues does not necessarily encourage local own revenues in Morocco. This unfavorable effect is more important for the poorest regions than for non-poorest ones.