Evaluating the impact of SUS transfers on municipalities' health expenditures

There is evidence in the literature that spending on a specific area could increase less than the amount transferred to that area, being the rest of the resources used to finance other public goods and services. This result became known as fungibility effect. The purpose of this paper is to evaluate the impact of SUS transfers on health spending, seeking to verify if most of the resources transferred by the government are in fact being used in health. We employed classical panel models, as well as fixed effect quantile regressions. We find evidence on the fungibility effect since for each R$ 1 transferred to health about R $ 0.20 are directed towards other areas. Besides the effect is smaller for municipalities with higher spending on health.