On the Link Between Fiscal Decentralization and Public Debt in OECD Countries
AbstractExcessive borrowing by subnational governments is considered to be one of the perils of fiscal decentralization. On the other hand, fiscal decentralization might ensure the scal stability of the public sector by constraining Leviathan governments. Since the impact of decentralized government on fiscal outcomes is therefore ambiguous from a theoretical perspective, we explore this question empirically with a panel of 17 OECD countries over the 1975-2001 period. Our findings suggest that expenditure decentralization signicantly reduces public indebtedness, whereas tax decentralization and vertical fiscal imbalances are insignicant.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 21599.
Date of creation: 2010
Date of revision:
Fiscal decentralization; Public debt; Soft budget constraints;
Other versions of this item:
- Thushyanthan Baskaran, 2010. "On the link between fiscal decentralization and public debt in OECD countries," Public Choice, Springer, vol. 145(3), pages 351-378, December.
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-04-04 (All new papers)
- NEP-PBE-2010-04-04 (Public Economics)
- NEP-URE-2010-04-04 (Urban & Real Estate Economics)
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