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Decentralization and Local Governments’ Performance: How Does Fiscal Autonomy Affect Spending Efficiency?

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Author Info

  • Lorenzo Boetti

    ()
    (Catholic University of Milan)

  • Massimiliano Piacenza

    ()
    (Department of Economics and Public Finance "G. Prato", University of Torino)

  • Gilberto Turati

    ()
    (Department of Economics and Public Finance "G. Prato", University of Torino)

Abstract

In Italy, as in other countries around the world, recent reforms share the goal of increasing the fiscal autonomy of lower tiers of governments, from Regions to Municipalities, in order to align spending with funding responsibilities and increase the efficiency in the provision of essential public services. The purpose of this paper is to assess spending efficiency of local governments and to investigate the effects of tax decentralization, focusing on the role played by incumbent politicians’ accountability. The analysis relies on a sample of Italian municipalities and exploits both parametric (SFA) and nonparametric (DEA) techniques to study spending inefficiency and its main determinants. Consistently with modern fiscal federalism theories, our results show that more fiscally autonomous municipalities exhibit less inefficient behaviours. We also find that the shorter is the distance from new elections, the higher is excess spending, thus giving further support to the traditional “electoral budget cycle” agument. Other political features of governing coalition, such as age and gender of the mayor, do not seem to exert any significant impact on inefficiency levels.

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File URL: http://web.econ.unito.it/prato/papers/n11.pdf
File Function: First version, 2010
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Bibliographic Info

Paper provided by Former Department of Economics and Public Finance "G. Prato", University of Torino in its series Working papers with number 11.

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Length: 37 pages
Date of creation: Mar 2010
Date of revision:
Handle: RePEc:tur:wpaper:11

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Related research

Keywords: Local governments; Fiscal autonomy; Political accountability; Spending efficiency; Parametric and nonparametric frontiers;

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Cited by:
  1. Laura Carosi & Giovanna D’Inverno & Letizia Ravagli, 2014. "Global public spending efficiency in Tuscan municipalities," Discussion Papers 2014/175, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  2. Sacchi, Agnese & Salotti, Simone, 2014. "The asymmetric nature of fiscal decentralization: theory and practice," MPRA Paper 54506, University Library of Munich, Germany.
  3. Bracalente, Bruno & Polinori, Paolo, 2010. "L’efficienza tecnico-economica dei servizi pubblici locali: i casi delle farmacie comunali e dei servizi di igiene urbana
    [Technical And Economic Efficiency Of Local Public Services: The Cases Of
    ," MPRA Paper 34455, University Library of Munich, Germany.
  4. David Cantarero & Patricio Perez, 2012. "Decentralization and regional government size in Spain," Portuguese Economic Journal, Springer, vol. 11(3), pages 211-237, December.
  5. Agnese Sacchi & Simone Salotti, 2012. "A comprehensive anlysis of expenditure decentralization and of the composition of local public spending," Departmental Working Papers of Economics - University 'Roma Tre' 0155, Department of Economics - University Roma Tre.
  6. Torrisi, Gianpiero & Pike, Andy & Tomaney, John & Tselios, Vassilis, 2011. "Defining and measuring decentralisation: a critical review," MPRA Paper 51441, University Library of Munich, Germany.

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