Municipalities of Sixth Category of Colombia (2000-2016): Between Autonomy and Dependence

Abstract

The implementation and evolution of the process of decentralization in Colombia in tax and administrative matters has been transferring competencies, functions and responsibilities to local governments, providing them with resources to assume new commitments through the transfer of funds from the central to the regional level. It has occurred in a scenario where the highest taxes belong to the nation, while municipalities must be financed with limited levies in terms of quantity and efficiency, which makes them depend, to a higher degree, on the money transferred from the central government. It is the case of 87.9% of the municipalities of Colombia which are classified as category six municipalities, according to the parameters established in Law 617/2000, and means that they have a low capacity for a self-financing and high level of tax reliance. These factors gave rise to the present article, in which this problem is approached with a causality analysis, based on the use of econometric estimations.