The Macroeconomic Impact of Decentralized Spending and Deficits: International Evidence
AbstractThe main macroeconomic questions about decentralization are whether it has led to an overall expansion of the public sector or to unsustainable fiscal deficits. In the long term, subnational spending contributes to a larger overall government sector, but steady subnational deficits do not affect the average level of central government deficits, according to our economic analysis of 32 industrial and developing countries, 1980-94. Increases of subnational spending and deficits, however, lead to increases in spending and deficits at the national level. The relationships are strong economically as well as significant statistically. We can reject the hypothesis that increases of transfers between central and subnational governments are usually determined exogenously by the center.
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Bibliographic InfoArticle provided by Society for AEF in its journal Annals of Economics and Finance.
Volume (Year): 1 (2000)
Issue (Month): 2 (November)
Decentralization; Public spending; Deficits;
Other versions of this item:
- Francesca Fornasari & Steven B. Webb & Heng-fu Zou, 1999. "The Macroeconomic Impact of Decentralized Spending and Deficits: International Evidence," CEMA Working Papers 28, China Economics and Management Academy, Central University of Finance and Economics, revised Oct 2000.
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
- H5 - Public Economics - - National Government Expenditures and Related Policies
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