Impact of own resources on municipalities' investments expenditures in Benin

Abstract

Purpose – This paper aims to study the impact of municipalities’ own resources on their investments‘ expenditure. Design/methodology/approach – Panel data analysis. A sample of 34 municipalities in Benin. Econometrics tests for the panel data models – estimation of the fixed-effect and random-effect models. Hausman test to identify the best model to explain the impact of the explanatory variables on local investments’ expenditures. Heteroskedasticity, normality and autocorrelation tests. Findings – The results establish a positive and significant impact of own resources, state transfers and demographic variables on local investments’ expenses. Research limitations/implications – As an implication, the results show the importance of local resources’ mobilization for the municipalities’ investment capacity building. They also show that the central government transfers continue to play a major place in local investments’ finance, even in a decentralization context. Limitation: Available data do not allow to well evaluate the impact of the electoral variable on municipalities’ investments’ expenditure. This situation does not allow to well analyze the public choice considerations in local authorities’ behaviors. Practical implications – Local mobilization of financial resources must be encouraged to raise municipalities’ investments’ capacities. Strategies must be developed to reinforce local capacities in local resources mobilization. Social implications – The results show the importance of local resources in local investments. They show the importance of citizens’ participation in their well-being construction, through local resource mobilization (ex: local fiscality). Originality/value – Many authors assert in the literature that financial autonomy has a real impact on local development. However, empirically, it was not demonstrated. This paper contributes to correct this lack.