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Economic Integration and Fiscal Decentralization: Evidence from OECD Countries

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  • Stegarescu, Dan
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    Abstract

    Drawing on recent work on the creation and breakup of countries, this paper examines the impact of economic and political integration on the vertical government structure. It argues that by increasing the market size and the benefits from the decentralized provision of public goods, integration might have triggered the recent process of fiscal decentralization in OECD countries. Based on a theoretical framework, the empirical panel analysis relates the degree of public sector decentralization to economic and European integration, controlling for inter-regional heterogeneity, economies of scale, and institutions. The results found mostly support a decentralizing effect of economic and European integration, particularly in the context of preference heterogeneity, whereas participation of sub-national governments in central decision-making is associated with increasing centralization. --

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    Bibliographic Info

    Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 04-86.

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    Date of creation: 2004
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    Handle: RePEc:zbw:zewdip:2890

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    Related research

    Keywords: Fiscal Decentralization; Economic Integration; European Union; ?Sandwich? Hypothesis;

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    Cited by:
    1. Federico Etro, 2006. "Political geography," Public Choice, Springer, vol. 127(3), pages 321-343, June.
    2. Freinkman, Lev & Plekhanov, Alexander, 2005. "What determines the extent of fiscal decentralization ? The Russian paradox," Policy Research Working Paper Series 3710, The World Bank.
    3. Thushyanthan Baskaran, 2010. "Supranational integration and national reorganization: On the Maastricht treaty’s impact on fiscal decentralization in EU countries," Constitutional Political Economy, Springer, vol. 21(4), pages 309-335, December.
    4. Freinkman, Lev & Plekhanov, Alexander, 2009. "Fiscal Decentralization in Rentier Regions: Evidence from Russia," World Development, Elsevier, vol. 37(2), pages 503-512, February.
    5. Antonio Sciala' & Paolo Liberati, 2008. "The impact of economic openness on the vertical structure of the public sector," "Marco Fanno" Working Papers 0085, Dipartimento di Scienze Economiche "Marco Fanno".
    6. Baskaran, Thushyanthan, 2009. "Supranational Integration And National Reorganization," MPRA Paper 21597, University Library of Munich, Germany.
    7. Stegarescu, Dan, 2005. "Centralizing Tendencies in the Public Sector in Germany," ZEW Discussion Papers 05-46, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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