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Does Decentralization Matter for Regional Disparities? A Cross-Country Analysis

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  • Roberto Ezcurra
  • Andrés Rodríguez-Pose

Abstract

This paper looks at the relationship between fiscal and political decentralization and theevolution of regional inequalities in a panel of 26 countries - 19 developed and 7 developing- for the period between 1990 and 2006. Using an instrumental variables method, it finds thatwhereas for the whole sample decentralization is completely dissociated for the evolution ofregional disparities, the results are highly contingent on the level of development, the existinglevel of territorial inequalities, and the fiscal redistributive capacity of the countries in thesample. Decentralization in high income countries has, if anything, been associated with areduction of regional inequality. In low and medium income countries, fiscal decentralizationhas been associated with a significant rise in regional disparities, which the positive effects ofpolitical decentralization have been unable to compensate. Policy preferences by subnationalgovernments for expenditure in economic affairs, education, and social protection havecontributed to this trend.

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Bibliographic Info

Paper provided by Spatial Economics Research Centre, LSE in its series SERC Discussion Papers with number 0025.

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Date of creation: Jul 2009
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Handle: RePEc:cep:sercdp:0025

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Web page: http://www.spatialeconomics.ac.uk/SERC/publications/default.asp

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Keywords: Fiscal decentralization; political decentralization; regional disparities; territorial inequality; fiscal redistribution;

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