Advanced Search
MyIDEAS: Login to save this paper or follow this series

Fiscal decentralization and regional disparities: the importance of good governance

Contents:

Author Info

  • Leonel Muinelo-Gallo

    ()
    (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)

  • Andreas P. Kyriacou

    ()
    (Universitat de Girona (España). Departament d’Economia)

  • Oriol Roca-Sagalés

    ()
    (Universitat Autònoma de Barcelona (España). Departament d’Economia Aplicada)

Abstract

In this paper we consider how government quality mediates the relationship between fiscal decentralization and regional disparities. Previous work has argued that fiscal decentralization has the potential to reduce income difference across regions but that this potential may not be realized because of governance problems associated with subnational authorities. Our empirical evidence based on a sample of 24 OECD countries over the period 1984 to 2006 lends a measure of support to this idea. We find that fiscal decentralization promotes regional convergence in high government quality settings but, worryingly, it leads to wider regional disparities in countries with poor governance. Because most poor countries are plagued with governance problems, this would caution against fiscal decentralization with a view to reducing regional disparities in these countries.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.iecon.ccee.edu.uy/download.php?len=es&id=338&nbre=dt-03-13.pdf&ti=application/pdf&tc=Publicaciones
Download Restriction: no

Bibliographic Info

Paper provided by Instituto de Economía - IECON in its series Documentos de Trabajo (working papers) with number 13-03.

as in new window
Length: 32 pages
Date of creation: Mar 2013
Date of revision:
Handle: RePEc:ulr:wpaper:dt-03-13

Contact details of provider:
Postal: Joaquín Requena 1375, CP 11200, Montevideo
Phone: (598) 2400-0406
Fax: (598) 2419-8727
Web page: http://www.iecon.ccee.edu.uy/
More information through EDIRC

Related research

Keywords: fiscal decentralization; regional disparities; government quality;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Andrés Rodríguez‐Pose, 2012. "Trade and Regional Inequality," Economic Geography, Clark University, Clark University, vol. 88(2), pages 109-136, 04.
  2. Panizza, Ugo, 1999. "On the determinants of fiscal centralization: Theory and evidence," Journal of Public Economics, Elsevier, Elsevier, vol. 74(1), pages 97-139, October.
  3. Treisman, Daniel, 2000. "The causes of corruption: a cross-national study," Journal of Public Economics, Elsevier, Elsevier, vol. 76(3), pages 399-457, June.
  4. Guido Tabellini, 2010. "Culture and Institutions: Economic Development in the Regions of Europe," Journal of the European Economic Association, European Economic Association, European Economic Association, vol. 8(4), pages 677-716, 06.
  5. Sarah Voitchovsky, 2005. "Does the Profile of Income Inequality Matter for Economic Growth?," Journal of Economic Growth, Springer, Springer, vol. 10(3), pages 273-296, 09.
  6. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, Elsevier, vol. 87(1), pages 115-143, August.
  7. Salmon, Pierre, 1987. "Decentralisation as an Incentive Scheme," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 3(2), pages 24-43, Summer.
  8. Robert J. Barro & Jong-Wha Lee, 2000. "International Data on Educational Attainment Updates and Implications," NBER Working Papers 7911, National Bureau of Economic Research, Inc.
  9. Weingast, Barry R, 1995. "The Economic Role of Political Institutions: Market-Preserving Federalism and Economic Development," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 11(1), pages 1-31, April.
  10. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, Elsevier, vol. 68(1), pages 29-51, July.
  11. Lapo Calamai, 2009. "The link between devolution and regional disparities: evidence from the Italian regions," Environment and Planning A, Pion Ltd, London, vol. 41(5), pages 1129-1151, May.
  12. Andreas P Kyriacou & Oriol Roca-Sagal�s, 2012. "The impact of EU structural funds on regional disparities within member states," Environment and Planning C: Government and Policy, Pion Ltd, London, Pion Ltd, London, vol. 30(2), pages 267-281, April.
  13. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2002. "Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Development," NBER Working Papers 9305, National Bureau of Economic Research, Inc.
  14. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  15. Arzaghi, Mohammad & Henderson, J. Vernon, 2005. "Why countries are fiscally decentralizing," Journal of Public Economics, Elsevier, Elsevier, vol. 89(7), pages 1157-1189, July.
  16. Joseph A Silva, 2005. "Devolution and regional disparities in the Philippines: is there a connection?," Environment and Planning C: Government and Policy, Pion Ltd, London, Pion Ltd, London, vol. 23(3), pages 399-417, June.
  17. Acemoglu, Daron & Johnson, Simon & Robinson, James A., 2005. "Institutions as a Fundamental Cause of Long-Run Growth," Handbook of Economic Growth, Elsevier, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 6, pages 385-472 Elsevier.
  18. KEEN, Michael & MARCHAND, Maurice, 1996. "Fiscal Competition and the Pattern of Public Spending," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 1996001, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  19. Jin, Hehui & Qian, Yingyi & Weingast, Barry R., 2005. "Regional decentralization and fiscal incentives: Federalism, Chinese style," Journal of Public Economics, Elsevier, Elsevier, vol. 89(9-10), pages 1719-1742, September.
  20. Nobuo Akai & Masayo Sakata, 2005. "Fiscal Decentralization, Commitment and Regional Inequality: Evidence from State-level Cross-sectional Data for the United States," CIRJE F-Series, CIRJE, Faculty of Economics, University of Tokyo CIRJE-F-315, CIRJE, Faculty of Economics, University of Tokyo.
  21. Hongbin Cai & Daniel Treisman, 2005. "Does Competition for Capital Discipline Governments? Decentralization, Globalization, and Public Policy," American Economic Review, American Economic Association, American Economic Association, vol. 95(3), pages 817-830, June.
  22. Dilip Mookherjee & Pranab K. Bardhan, 2000. "Capture and Governance at Local and National Levels," American Economic Review, American Economic Association, American Economic Association, vol. 90(2), pages 135-139, May.
  23. Oates, Wallace E., 1993. "Fiscal Decentralization and Economic Development," National Tax Journal, National Tax Association, vol. 46(2), pages 237-43, June.
  24. Michael P. Murray, 2006. "Avoiding Invalid Instruments and Coping with Weak Instruments," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 20(4), pages 111-132, Fall.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Masayoshi Hayashi, 2013. "On the Decomposition of Regional Stabilization and Redistribution," CIRJE F-Series, CIRJE, Faculty of Economics, University of Tokyo CIRJE-F-910, CIRJE, Faculty of Economics, University of Tokyo.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ulr:wpaper:dt-03-13. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Andrés Dean).

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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