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Does decentralization improve the efficiency in the allocation of public investment? Evidence from Spain

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Author Info
Alejandro Esteller () (Institut d'Economia de Barcelona (IEB); Universitat de Barcelona (UB))
Albert Solé () (Institut d'Economia de Barcelona (IEB); Universitat de Barcelona (UB))

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Abstract

The well-known "Decentralization Theorem" (Oates, 1972) establishes the superiority of decentralized public provision over the centralized case, which is not so sensitive to the diversity of expenditure needs among territories. We test this hypothesis using a unique Spanish database that provides information on road and educational infrastructure investment and capital stocks by region both before and after the decentralization of such responsibilities. We find that investment in both categories is much more sensitive to regional output and to infrastructure users and costs when sub-central governments have the responsibility over such services.

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Publisher Info
Paper provided by Institut d'Economia de Barcelona (IEB) in its series Working Papers with number 2005/5.

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Length: 45 pages
Date of creation: 2005
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Handle: RePEc:ieb:wpaper:357450art73

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Related research
Keywords: Decentralization; Growth; Human capital; Roads;

Find related papers by JEL classification:
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
I20 - Health, Education, and Welfare - - Education - - - General

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