Decentralization Effects in Ecological Fiscal Transfers: A Bayesian Structural Time Series Analysis for Portugal

Abstract

Portugal has a unitary system in which the central government transfers funds to lower government levels for their public functions. In 2007, Portugal introduced Ecological Fiscal Transfers (EFT), where municipalities receive transfers for hosting protected areas (PA). We study whether introducing EFT in Portugal incentivized municipalities to designate PA and has led to a decentralization of conservation decisions. We employ a Bayesian structural time series approach to estimate the effect of introducing EFT in comparison to a simulated counterfactual time series. Quantitative results show a significant increase in the ratio of municipal and national PA designations following Portugal’s EFT introduction—which we infer to be a causal consequence. The analysis furthermore places emphasis on the importance of relevant municipal conservation competencies for the functioning of the instrument. Results have important implications for conservation policy-making in terms of allocating budgets and competencies in multi-level governments.

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Notes

  1. 1.

    For an analysis of strategic interactions at the local level in the Brazilian state Paraná see Sauquet et al. (2014).

  2. 2.

    For an application of voter behaviour with web search data see Street et al. (2015).

  3. 3.

    In this context, it is worth noting, that the Natura 2000 network (including most other PA) covered 18.8 per cent of continental Portugal in 2010, while the RNAP only accounted for 7.9 per cent (INE 2015) and in 2013 Natura 2000 covered 20.7 per cent of entire Portugal (EU 2015) while the RNAP accounted for 8.5 per cent of Portugal (ICNF 2015). This is due to the special nature of Natura 2000 sites which are not necessarily to be designated as PA under national law but managed according to EU law. The EFT mechanism, however, accounts for both Natura 2000 and RNAP sites.

  4. 4.

    Monetary values were deflated based on the World Bank GDP deflator for Portugal or calculated in Euro with average US dollar exchange rates for 2005.

Abbreviations

AR:

Autoregressive

CI:

Confidence interval

EFT:

Ecological Fiscal Transfers

EU:

European Union

GDP:

Gross domestic product

GMF:

General Municipal Fund

ICNF:

Instituto da Conservação da Natureza e das Florestas

IUCN:

International Union for Conservation of Nature

MCMC:

Markov chain Monte Carlo

NGO:

Non-governmental organization

PA:

Protected area

RNAP:

Rede Nacional de Áreas Protegidas

SAC:

Special Areas of Conservation

SD:

Standard deviation

SPA:

Special Protection Areas

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Acknowledgements

While retaining responsibility for any error, we thank the editor, two anonymous reviewers, the participants of the AURÖ 2016 and LACEA/LAMES 2016 conferences, and colleagues at Cense and UFZ for helpful comments and suggestions. Furthermore, ND is grateful for financial support of the Heinrich Böll foundation (Grant No. P118873).

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Correspondence to Nils Droste.

Appendix: Descriptive Statistics

Appendix: Descriptive Statistics

Summary Statistics

See Table 2.

Table 2 Summary statistics.

Time Series of Dependent Variable Components for Robustness Checks

See Table 3.

Table 3 Time series of PA designation variables at different government levels.

Monte Carlo Standard Errors

See Table 4.

Table 4 Monte Carlo standard errors of estimated coefficients.

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Droste, N., Becker, C., Ring, I. et al. Decentralization Effects in Ecological Fiscal Transfers: A Bayesian Structural Time Series Analysis for Portugal. Environ Resource Econ 71, 1027–1051 (2018). https://doi.org/10.1007/s10640-017-0195-7

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Keywords

  • Bayesian structural time series
  • Ecological Fiscal Transfers
  • Fiscal federalism
  • Municipal conservation competencies
  • Portugal

JEL Codes

  • C32
  • H41
  • H72
  • Q57