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Regional inequality and decentralization: an empirical analysis

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  • Christian Lessmann

Abstract

This paper analyzes the impact of political and fiscal decentralization on regional inequalities, using a unique dataset which covers fifty-four countries at different stages of economic development. Cross-section and panel data estimations show that decentralization decreases regional inequalities in general. However, estimations using an interaction-variable approach imply that the effect depends on the level of economic development. While rich countries benefit from decentralization in that they achieve a more equal regional income distribution, decentralization may lead to higher regional inequalities in developing and emerging economies. The results point in the same direction for measures of fiscal and political decentralization, implying that autonomy in both decision making and fiscal authority are decisive in this context. Thus, when fostering decentralization in developing countries as proposed by international development agencies, the potential negative redistributional consequences should be taken into account. Keywords: regional inequality, decentralization, panel data

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Bibliographic Info

Article provided by Pion Ltd, London in its journal Environment and Planning A.

Volume (Year): 44 (2012)
Issue (Month): 6 (June)
Pages: 1363-1388

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Handle: RePEc:pio:envira:v:44:y:2012:i:6:p:1363-1388

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Cited by:
  1. Mohammad Reza Farzanegan & Christian Lessmann & Gunther Markwardt, 2013. "Natural-Resource Rents and Internal Conflicts - Can Decentralization Lift the Curse?," CESifo Working Paper Series 4180, CESifo Group Munich.
  2. Christian Lessmann, 2011. "Spatial Inequality and Development - Is there an Inverted-U Relationship?," CESifo Working Paper Series 3622, CESifo Group Munich.
  3. Georg Hirte & Christian Lessmann, 2014. "Trade, Integration, and Interregional Inequality," CESifo Working Paper Series 4799, CESifo Group Munich.

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