THE IMPACT OF FUNDEB TRANSFERS ON EXPENDITURE WITH EDUCATION IN BRAZILIAN MUNICIPALITIES
Transfers for education; Fungibility; Quantile regression; Brazilian municipalities.
The theory of fiscal federalism indicates that spending in a specific area can increase less than the transfers made to that area, with the rest of the transfers spent to finance other goods and services, or to reduce tax collection.
This issue is known as the fungibility effect of transfers. In that sense, the The objective of this work is to estimate, from quantile regressions with fixed effects for panel data, between the period 2013 and 2018, the response of municipal expenditures in education to Funded conditional transfers, seeking to verify that the resources are, in fact, being directed towards education services. Furthermore, it was estimated other models to give robustness to the results. The results of the regression model quantile with fixed effects indicate that for every R$1 increase in transfers Fundeb, R$ 0.38/capita is allocated to other expenses, considering the highest quantile education spending. Therefore, based on the results found, it is concluded that there is evidence of fungibility in Fundeb transfers, thereby reducing the quality of education and, in the long run, harming economic development.