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Different forms of decentralization and their impact on government performance: Micro-level evidence from 113 countries

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  • Goel, Rajeev K.
  • Mazhar, Ummad
  • Nelson, Michael A.
  • Ram, Rati

Abstract

This study of the effect of decentralization on government performance differs from the vast literature on the topic in three major ways. First, we compare the effects of four different forms of decentralization, namely, fiscal decentralization, administrative decentralization, federalism, and aggregate decentralization. Second, we study the effect on three dimensions of government performance, namely, tax administration, business licensing and permits, and corruption. Third, the effects are judged in terms of the perceptions of nearly 100,000 business leaders located in 113 countries. Seven statements summarize our findings. First, fiscal and administrative decentralization improve perceptions of government performance. Second, federalism is associated with worse perceptions. Third, the effect of aggregate decentralization is ambiguous. Fourth, service industries tend to perceive decentralization more favorably than others. Fifth, large firms perceive decentralization less favorably than other firms. Sixth, the effect of the same form of decentralization varies in magnitude across the three government activities. Seventh, therefore, decentralization may not be oversold as a policy prescription to improve government performance; the form of decentralization and its contextualization in terms of the targeted area of government activity need careful consideration.

Suggested Citation

  • Goel, Rajeev K. & Mazhar, Ummad & Nelson, Michael A. & Ram, Rati, 2017. "Different forms of decentralization and their impact on government performance: Micro-level evidence from 113 countries," Economic Modelling, Elsevier, vol. 62(C), pages 171-183.
  • Handle: RePEc:eee:ecmode:v:62:y:2017:i:c:p:171-183
    DOI: 10.1016/j.econmod.2016.12.010
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    4. David Bartolini & Agnese Sacchi & Domenico Scalera & Alberto Zazzaro, 2018. "The closer the better? Institutional distance and information blurring in a political agency model," Mo.Fi.R. Working Papers 146, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    5. Christl, Michael & Köppl-Turyna, Monika & Kucsera, Dénes, 2018. "Public sector efficiency in Europe: Long-run trends, recent developments and determinants," Working Papers 14, Agenda Austria.
    6. Liu, Shasha & Ji, Mianmian & Wang, Huijuan, 2021. "Decentralization and firm innovation: Evidence from a natural experiment in China," Economic Modelling, Elsevier, vol. 94(C), pages 501-512.
    7. Que, Wei & Zhang, Yabin & Schulze, Günther, 2019. "Is public spending behavior important for Chinese official promotion? Evidence from city-level," China Economic Review, Elsevier, vol. 54(C), pages 403-417.
    8. Ummad Mazhar & Fahd Rehman, 2019. "Diehard or delicate? Violence and young firm performance in a developing country," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 54(4), pages 236-247, October.
    9. Goel, Rajeev K. & Mazhar, Ummad & Saunoris, James W., 2020. "Identifying the corrupt cog in the wheel: Dimensions of supply chain logistics and cross‐country corruption," Open Access Publications from Kiel Institute for the World Economy 231407, Kiel Institute for the World Economy (IfW).
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    More about this item

    Keywords

    Fiscal decentralization; Administrative decentralization; Federalism; Aggregate decentralization; Government performance;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • K2 - Law and Economics - - Regulation and Business Law
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior

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