IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/79630.html
   My bibliography  Save this paper

Decentralization and fiscal performance in Central and Eastern Europe

Author

Listed:
  • Makreshanska, Suzana
  • Petrevski, Goran

Abstract

The paper provides empirical evidence on the association between decentralization and fiscal performance of the general government on a panel of 11 former transition countries during 1996-2012, controlling for the effects of various demographic, institutional, and macroeconomic variables. Also, for robustness check we make a comparison with a panel of 18 industrialized European economies. The main findings from the empirical investigation suggest that decentralizing government activities in Central and Eastern Europe leads to an increase in the efficiency in the provision of public goods. Also, we show that not only the extent of fiscal decentralization, but the composition of local revenue, too, matters for fiscal discipline. In these regards, providing local governments with higher autonomy in financing their activities by relying more on their “own” tax revenues instead of intergovernmental grants seems to be conducive with fiscal discipline. In contrast to the sample consisting of the former transition economies, we cannot find evidence on the association between decentralization and fiscal discipline in the developed European countries.

Suggested Citation

  • Makreshanska, Suzana & Petrevski, Goran, 2016. "Decentralization and fiscal performance in Central and Eastern Europe," MPRA Paper 79630, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:79630
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/79630/1/MPRA_paper_79630.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 38(2), pages 112-134.
    2. Shah, Anwar, 2004. "Fiscal decentralization in developing and transition economies: progress, problems, and the promise," Policy Research Working Paper Series 3282, The World Bank.
    3. Rodden, Jonathan, 2003. "Reviving Leviathan: Fiscal Federalism and the Growth of Government," International Organization, Cambridge University Press, vol. 57(4), pages 695-729, October.
    4. Jorge Martinez-Vazquez & Robert McNab, 2005. "Fiscal Decentralization,Macrostability, and Growth (2005)," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0506, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    5. de Mello, Luiz Jr, 2000. "Fiscal Decentralization and Intergovernmental Fiscal Relations: A Cross-Country Analysis," World Development, Elsevier, vol. 28(2), pages 365-380, February.
    6. Philip Grossman, 1989. "Fiscal decentralization and government size: An extension," Public Choice, Springer, vol. 62(1), pages 63-69, July.
    7. Edwin West, 1992. "Federalism and the Growth of Government Revisited," Carleton Economic Papers 92-06, Carleton University, Department of Economics, revised Apr 1994.
    8. Grossman, Philip J & West, Edwin G, 1994. "Federalism and the Growth of Government Revisited," Public Choice, Springer, vol. 79(1-2), pages 19-32, April.
    9. Neyapti, Bilin, 2010. "Fiscal decentralization and deficits: International evidence," European Journal of Political Economy, Elsevier, vol. 26(2), pages 155-166, June.
    10. Ebel, Robert D. & Yilmaz, Serdar, 2002. "On the measurement and impact of fiscal decentralization," Policy Research Working Paper Series 2809, The World Bank.
    11. Thornton, John, 2007. "Further evidence on revenue decentralization and inflation," Economics Letters, Elsevier, vol. 95(1), pages 140-145, April.
    12. Eyraud, Luc & Lusinyan, Lusine, 2013. "Vertical fiscal imbalances and fiscal performance in advanced economies," Journal of Monetary Economics, Elsevier, vol. 60(5), pages 571-587.
    13. Velasco, Andres, 2000. "Debts and deficits with fragmented fiscal policymaking," Journal of Public Economics, Elsevier, vol. 76(1), pages 105-125, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Makreshanska, Suzana & Petrevski, Goran, 2015. "Fiscal Decentralization and Inflation in Central and Eastern Europe," MPRA Paper 77596, University Library of Munich, Germany, revised 16 Mar 2017.
    2. Manuel E. Lago & Santiago Lago-Peñas & Jorge Martinez-Vazquez, 2022. "On the effects of intergovernmental grants: a survey," Working Papers. Collection A: Public economics, governance and decentralization 2204, Universidade de Vigo, GEN - Governance and Economics research Network.
    3. Baskaran, Thushyanthan, 2011. "Fiscal decentralization, ideology, and the size of the public sector," European Journal of Political Economy, Elsevier, vol. 27(3), pages 485-506, September.
    4. Makreshanska, Suzana & Petrevski, Goran, 2016. "Fiscal decentralization and government size across Europe," MPRA Paper 82472, University Library of Munich, Germany.
    5. Jia, Junxue & Liu, Yongzheng & Martinez-Vazquez, Jorge & Zhang, Kewei, 2021. "Vertical fiscal imbalance and local fiscal indiscipline: Empirical evidence from China," European Journal of Political Economy, Elsevier, vol. 68(C).
    6. Jorge Martinez-Vazquez & Santiago Lago-Peñas & Agnese Sacchi, 2017. "The Impact Of Fiscal Decentralization: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 31(4), pages 1095-1129, September.
    7. Serhan Cevik, 2017. "Size matters: fragmentation and vertical fiscal imbalances in Moldova," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 44(2), pages 367-381, May.
    8. Mr. Serhan Cevik, 2014. "Fragmentation and Vertical Fiscal Imbalances Lessons from Moldova," IMF Working Papers 2014/233, International Monetary Fund.
    9. Akalbeo, Benard & Martinez-Vazquez, Jorge & Yedgenov, Bauyrzhan, 2023. "Fiscal decentralization and structural versus cyclical unemployment levels," European Journal of Political Economy, Elsevier, vol. 80(C).
    10. David Bartolini & Agnese Sacchi & Simone Salotti & Raffaella Santolini, 2018. "Fiscal Decentralization in Times of Financial Crises," CESifo Economic Studies, CESifo Group, vol. 64(3), pages 456-488.
    11. Santiago Lago-Peñas & Jorge Martinez-Vazquez & Agnese Sacchi, 2020. "Fiscal stability during the Great Recession: putting decentralization design to the test," Regional Studies, Taylor & Francis Journals, vol. 54(7), pages 919-930, July.
    12. Qiao, Mo & Ding, Siying & Liu, Yongzheng, 2019. "Fiscal decentralization and government size: The role of democracy," European Journal of Political Economy, Elsevier, vol. 59(C), pages 316-330.
    13. Samuel Kwabena Obeng, 2021. "Fiscal decentralization, democracy and government size: Disentangling the complexities," Journal of International Development, John Wiley & Sons, Ltd., vol. 33(6), pages 975-1004, August.
    14. Lars P. Feld & Gebhard Kirchgässner & Christoph A. Schaltegger, 2010. "Decentralized Taxation and the Size of Government: Evidence from Swiss State and Local Governments," Southern Economic Journal, John Wiley & Sons, vol. 77(1), pages 27-48, July.
    15. Stefan Voigt, 2011. "Positive constitutional economics II—a survey of recent developments," Public Choice, Springer, vol. 146(1), pages 205-256, January.
    16. Lars Feld, 2014. "James Buchanan’s theory of federalism: from fiscal equity to the ideal political order," Constitutional Political Economy, Springer, vol. 25(3), pages 231-252, September.
    17. Paolo Liberati & Agnese Sacchi, 2013. "Tax decentralization and local government size," Public Choice, Springer, vol. 157(1), pages 183-205, October.
    18. Busemeyer, Marius R., 2007. "The Impact of Fiscal Decentralisation on Education and Other Types of Spending," MPIfG Discussion Paper 07/8, Max Planck Institute for the Study of Societies.
    19. Russell Sobel & George Crowley, 2014. "Do intergovernmental grants create ratchets in state and local taxes?," Public Choice, Springer, vol. 158(1), pages 167-187, January.
    20. David Cantarero & Patricio Perez, 2012. "Decentralization and regional government size in Spain," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 11(3), pages 211-237, December.

    More about this item

    Keywords

    Fiscal decentralization; Budget deficits; Central and Eastern Europe; Panel data models;
    All these keywords.

    JEL classification:

    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H76 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Other Expenditure Categories
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:79630. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.