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 InfoPaper provided by China Economics and Management Academy, Central University of Finance and Economics in its series CEMA Working Papers with number 28.
Length: 31 pages
Date of creation: Nov 1999
Date of revision: Oct 2000
Publication status: Published in Annals of Economics and Finance, Nov 2000, pages 403-433
Decentralization; Public spending; Deficits;
Other versions of this item:
- Francesca Fornasari & Steven B. Webb & Heng-fu Zou, 2000. "The Macroeconomic Impact of Decentralized Spending and Deficits: International Evidence," Annals of Economics and Finance, Society for AEF, vol. 1(2), pages 403-433, November.
- 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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