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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))

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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Bibliographic 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
Date of revision:
Handle: RePEc:ieb:wpaper:357450art73

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Keywords: Decentralization; Growth; Human capital; Roads;

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References

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  1. Johansson, E., 1999. "Intergovernmental Grants As A Tactical Instrument: Some Empirical Evidence from Swedish Municipalities," Papers, Uppsala - Working Paper Series 1999:10, Uppsala - Working Paper Series.
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  5. Castells, Antoni & Sole-Olle, Albert, 2005. "The regional allocation of infrastructure investment: The role of equity, efficiency and political factors," European Economic Review, Elsevier, Elsevier, vol. 49(5), pages 1165-1205, July.
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  9. Olivier Cadot & Lars-Hendrik Röller & Andreas Stephan, 1999. "A Political Economy Model of Infrastructure Allocation: An Empirical Assessment," CIG Working Papers, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG) FS IV 99-15, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  10. Mas, Matilde & Perez, Francisco & Uriel, Ezequiel, 2000. "Estimation of the Stock of Capital in Spain," Review of Income and Wealth, International Association for Research in Income and Wealth, International Association for Research in Income and Wealth, vol. 46(1), pages 103-16, March.
  11. Besley, Timothy & Coate, Stephen, 2003. "Centralized versus decentralized provision of local public goods: a political economy approach," Journal of Public Economics, Elsevier, Elsevier, vol. 87(12), pages 2611-2637, December.
  12. Wright, Gavin, 1974. "The Political Economy of New Deal Spending: An Econometric Analysis," The Review of Economics and Statistics, MIT Press, vol. 56(1), pages 30-38, February.
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Cited by:
  1. Andreas Kappeler & Albert Solé-Ollé & Andreas Stephan & Timo Välilä, 2012. "Does Fiscal Decentralisation Foster Regional Investment in Productive Infrastructure?," Discussion Papers of DIW Berlin 1204, DIW Berlin, German Institute for Economic Research.

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