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Reexamining the determinants of fiscal decentralization: what is the role of geography?

Author

Listed:
  • Gustavo Canavire-Bacarreza
  • Jorge Martinez-Vazquez
  • Bauyrzhan Yedgenov

Abstract

This paper contributes to the existing literature on the determinants of fiscal decentralization by exploring in depth the empirical relevance of physical geography as a determinant of fiscal decentralization; more geographically diverse countries show greater heterogeneity among their citizens. The theoretical framework imbeds geography into the concept of spatial decay in the provision of public services and our empirical estimation employs a panel data set for 94 countries for the period 1970–2010. Following the ‘first nature’ geography literature we construct a geographical fragmentation index based on elevation data and find that geographical fragmentation and area are significantly and positively related to fiscal decentralization. Following the ‘second nature’ geography literature we interact the geographical fragmentation index with time variant infrastructure variables, in order to test the effect that infrastructure and communications have on physical geography and fiscal decentralization. While the development of infrastructure tends to reduce the effect of physical geography on decentralization, this effect is rather small and mostly statistically insignificant.

Suggested Citation

  • Gustavo Canavire-Bacarreza & Jorge Martinez-Vazquez & Bauyrzhan Yedgenov, 2017. "Reexamining the determinants of fiscal decentralization: what is the role of geography?," Journal of Economic Geography, Oxford University Press, vol. 17(6), pages 1209-1249.
  • Handle: RePEc:oup:jecgeo:v:17:y:2017:i:6:p:1209-1249.
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    Cited by:

    1. Milan Jílek, 2015. "Factors of Tax Decentralization in OECD-Europe Countries," European Financial and Accounting Journal, University of Economics, Prague, vol. 2015(2), pages 33-49.
    2. Gustavo Canavire-Bacarreza & Alejandra Montoya-Agudelo & Felipe Bedoya-Maya, 2017. "An Uphill Battle: The Relationship Between Geography and Terrorism," DOCUMENTOS DE TRABAJO CIEF 015759, UNIVERSIDAD EAFIT.
    3. Norman V. Loayza & Jamele Rigolini & Oscar Calvo-González, 2014. "More Than You Can Handle: Decentralization and Spending Ability of Peruvian Municipalities," Economics and Politics, Wiley Blackwell, vol. 26(1), pages 56-78, March.
    4. Jorge Martinez-Vazquez & Santiago Lago-Peñas & Agnese Sacchi, 2017. "The Impact Of Fiscal Decentralization: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 31(4), pages 1095-1129, September.

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