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The new Local Finance Law

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This dissertation explores the Portuguese new Local Finance Law: Lei 02/07. It computes each municipality’s revenue under the former and the new laws’ distribution criteria, using the same data. It then performs an econometric analysis in order to identify the main sources of the municipalities’ revenue variations. The results allow us to conclude that the new law, in general, did not change much, as the municipalities that were receiving more funds are still the ones receiving more, under the new distribution criteria. Furthermore, municipalities have no incentives to be pro-active and to increase their economic activity. Hence, the new law is penalizing the municipalities that have shown greater dynamism and that have contributed more to the country development.

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A Work Project, presented as part of the requirements for the Award of a Masters Degree in Economics from the Faculdade de Economia da Universidade Nova de Lisboa

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Local finances Portugal Government decentralization Local Authorities revenue allocation

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Licença CC