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Decentralization and Local Governments' Performance: How Does Fiscal Autonomy Affect Spending Efficiency?

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  • Lorenzo Boetti
  • Massimiliano Piacenza
  • Gilberto Turati

Abstract

All over the world, recent legislative reforms share the goal of increasing fiscal autonomy of lower tiers of governments. The aim of this policy is to reduce vertical fiscal imbalance (VFI) and enhance the efficiency in the provision of public services, via increased accountability of local politicians. The purpose of this paper is to assess whether inefficiency of local governments is really affected by the degree of VFI, relying on a sample of Italian municipalities to study the determinants of spending performance. Consistently with modern fiscal federalism theories, our results show that more fiscally autonomous municipalities exhibit less inefficient behavior, thus supporting the waves of reforms towards the devolution of taxing power to lower government tiers.

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Bibliographic Info

Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.

Volume (Year): 68 (2012)
Issue (Month): 3 (September)
Pages: 269-302

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Handle: RePEc:mhr:finarc:urn:sici:0015-2218(201209)68:3_269:dalgph_2.0.tx_2-m

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Related research

Keywords: municipalities; decentralization; fiscal autonomy; electoral accountability; spending inefficiency;

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Cited by:
  1. Laura Carosi & Giovanna D’Inverno & Letizia Ravagli, 2014. "Global public spending efficiency in Tuscan municipalities," Discussion Papers 2014/175, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  2. Agnese Sacchi & Simone Salotti, 2012. "A comprehensive anlysis of expenditure decentralization and of the composition of local public spending," Departmental Working Papers of Economics - University 'Roma Tre' 0155, Department of Economics - University Roma Tre.
  3. David Cantarero & Patricio Perez, 2012. "Decentralization and regional government size in Spain," Portuguese Economic Journal, Springer, vol. 11(3), pages 211-237, December.
  4. Sacchi, Agnese & Salotti, Simone, 2014. "The asymmetric nature of fiscal decentralization: theory and practice," MPRA Paper 54506, University Library of Munich, Germany.
  5. Bracalente, Bruno & Polinori, Paolo, 2010. "L’efficienza tecnico-economica dei servizi pubblici locali: i casi delle farmacie comunali e dei servizi di igiene urbana
    [Technical And Economic Efficiency Of Local Public Services: The Cases Of
    ," MPRA Paper 34455, University Library of Munich, Germany.
  6. Torrisi, Gianpiero & Pike, Andy & Tomaney, John & Tselios, Vassilis, 2011. "Defining and measuring decentralisation: a critical review," MPRA Paper 51441, University Library of Munich, Germany.
  7. Agnese Sacchi & Simone Salotti, 2014. "The influence of decentralized taxes and intergovernmental grants on local spending volatility," Working Papers 1405, Universidade de Vigo, GEN - Governance and Economics research Network.

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