Administrative Modernization and Municipal Tax Capacity: Evidence from Northeast Brazil

This paper estimates the causal impact of the National Program for Fiscal Management Support for Brazilian Municipalities (PNAFM), funded by the Inter-American Development Bank (IDB) through the Ministry of Finance, and the Program for Modernization of Tax Administration (PMAT), funded by the National Bank for Economic and Social Development (BNDES), on own-source tax revenues across municipalities in Northeast Brazil from 1994 to 2023. The empirical analysis utilizes administrative and fiscal data from BNDES, the IDB, the Brazilian Public Sector Accounting and Fiscal Information System (SICONFI), and the Brazilian Institute of Geography and Statistics (IBGE). Causal identification is achieved through a multi-period difference-in-differences design that estimates group-time average treatment effects. The results demonstrate that municipalities participating in these programs experienced statistically significant increases (at the 1% level) in own-source tax revenues when compared to socioeconomically similar jurisdictions that did not adopt either PNAFM or PMAT.