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The effects of economic and political integration on fiscal decentralization: evidence from OECD countries

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  • Dan Stegarescu

Abstract

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 of decentralized provision of public goods, integration triggered the recent process of decentralization in OECD countries. A panel analysis relates the degree of fiscal decentralization to economic and European integration, controlling for interregional heterogeneity, economies of scale, and institutions. The results mostly support a decentralizing effect of economic integration in general and of European integration in particular for heterogeneous EU countries, whereas participation of subnational governments in national decision-making is associated with more centralization.

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  • Dan Stegarescu, 2009. "The effects of economic and political integration on fiscal decentralization: evidence from OECD countries," Canadian Journal of Economics, Canadian Economics Association, vol. 42(2), pages 694-718, May.
  • Handle: RePEc:cje:issued:v:42:y:2009:i:2:p:694-718
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    Cited by:

    1. Wu, Alfred M. & Wang, Wen, 2013. "Determinants of Expenditure Decentralization: Evidence from China," World Development, Elsevier, vol. 46(C), pages 176-184.
    2. Luiz de Mello & João Tovar Jalles, 2018. "The global crisis and intergovernmental relations: Revisiting the centralisation-decentralisation debate ten years on," Working Papers. Collection A: Public economics, governance and decentralization 1803, Universidade de Vigo, GEN - Governance and Economics research Network.
    3. David Bartolini & Agnese Sacchi & Simone Salotti & Raffaella Santolini, 2015. "Fiscal decentralisation in times of financial crises," Working Papers. Collection A: Public economics, governance and decentralization 1506, Universidade de Vigo, GEN - Governance and Economics research Network.
    4. Antonis Adam & Manthos Delis & Pantelis Kammas, 2014. "Fiscal decentralization and public sector efficiency: evidence from OECD countries," Economics of Governance, Springer, vol. 15(1), pages 17-49, February.
    5. Agnese Sacchi & Simone Salotti, 2016. "A Comprehensive Analysis of Expenditure Decentralization and of the Composition of Local Public Spending," Regional Studies, Taylor & Francis Journals, vol. 50(1), pages 93-109, January.
    6. Barbara ERMINI & Raffaella SANTOLINI, 2013. "Does globalization matter on fiscal decentralization of OECD?," Working Papers 390, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    7. Paolo Liberati & Antonio Sciala, 2011. "How economic integration affects the vertical structure of the public sector," Economics of Governance, Springer, vol. 12(4), pages 385-402, December.
    8. Davide Furceri & Agnese Sacchi & Simone Salotti, 2016. "Can Fiscal Decentralization Alleviate Government Consumption Volatility?," Open Economies Review, Springer, vol. 27(4), pages 611-636, September.
    9. Norman Gemmell & Richard Kneller & Ismael Sanz, 2013. "Fiscal Decentralization And Economic Growth: Spending Versus Revenue Decentralization," Economic Inquiry, Western Economic Association International, vol. 51(4), pages 1915-1931, October.
    10. Oto-Peralías, Daniel & Romero-Ávila, Diego & Usabiaga, Carlos, 2013. "Does fiscal decentralization mitigate the adverse effects of corruption on public deficits?," European Journal of Political Economy, Elsevier, vol. 32(C), pages 205-231.
    11. Michael, Bryane & Popov, Maja, 2011. "The Size and Structure of Government," MPRA Paper 53283, University Library of Munich, Germany.
    12. Andreas P. Kyriacou & Leonel Muinelo-Gallo & Oriol Roca-Sagalés, 2015. "Regional inequalities, fiscal decentralization and government quality: empirical evidence from simultaneous equations," Working Papers. Collection A: Public economics, governance and decentralization 1501, Universidade de Vigo, GEN - Governance and Economics research Network.
    13. Mario Jametti & Marcelin Joanis, 2010. "Determinants of fiscal decentralization: political economy aspects," Working Papers 2010/7, Institut d'Economia de Barcelona (IEB).
    14. Cont, Walter & Porto, Alberto, 2014. "Personal and regional redistribution through public finance in a federal setting," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(4), pages 563-578.
    15. Sacchi, Agnese & Salotti, Simone, 2014. "The asymmetric nature of fiscal decentralization: theory and practice," MPRA Paper 54506, University Library of Munich, Germany.
    16. Gu, Gyun Cheol, 2012. "Developing Composite Indicators for Fiscal Decentralization: Which Is The Best Measure For Whom?," MPRA Paper 43032, University Library of Munich, Germany.
    17. Neyapti, Bilin, 2010. "Fiscal decentralization and deficits: International evidence," European Journal of Political Economy, Elsevier, vol. 26(2), pages 155-166, June.
    18. Hana Lipovská, 2016. "European Secession: Economic Integration on the Road to the Political Desintegration," Současná Evropa, University of Economics, Prague, vol. 2016(1), pages 29-41.
    19. Arze del Granado, F. Javier & Martinez-Vazquez, Jorge & McNab, Robert M., 2012. "Decentralized Governance and Preferences for Public Goods," MPRA Paper 42459, University Library of Munich, Germany.
    20. Porto, Alberto & Tortarolo, Natalia Porto y Darío, 2014. "“Glocalization” and decentralization: The role of local governments in the new international context," MPRA Paper 63743, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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