Abstract

This research in intended to measure the gap between the existing level of grants to municipalities on account of school level education, primary health services and other services, relative to a theoretically advisable expenditure level per beneficiary based on the so called “Fiscal Need Approach to Equalization” as developed by Shah (1996, 2007). Since the early 80s, Chilean municipalities administer both school level public education as well as primary health centers, on account of which the central government grants municipalities with a transfer per beneficiary. Direct observation of the data suggests that significant differences exist in the funding per head at these functions. Our main finding hinges upon the fact that an estimated deficit (surplus) per regional government –this being the result of summing up municipal level estimated outputs, does not support the hypothesis that Chile is a fiscally “centralized” country.