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The economic (in)efficiency of devolution

Author

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  • Andrés Rodríguez-Pose
  • Adala Bwire

Abstract

The recent devolutionary trend across the world has been in part fuelled by claims of a supposed 'economic dividend' associated with the decentralization of authority and resources. The capacity of devolved administrations with greater autonomous powers to tailor policies to local preferences, to generate innovation in the provision of policies and public services, and to encourage greater participation and be more accountable is supposed to deliver greater economic efficiency. There is, however, little empirical evidence to substantiate these claims. In this paper we assess the horizontal link between devolution and regional economic growth in six national contexts (Germany, India, Italy, Mexico, Spain, and the USA). Regression analyses are used in order to test whether changes in cross-regional differences in growth patterns within each country can be attributed to changes in levels of regional autonomy. The results suggest that, contrary to the expectations of devolutionists, the degree of devolution is in most cases irrelevant for economic growth and, when it matters -- as in the cases of Mexico and the USA -- it is linked to lower rather than greater economic efficiency.

Suggested Citation

  • Andrés Rodríguez-Pose & Adala Bwire, 2004. "The economic (in)efficiency of devolution," Environment and Planning A, Pion Ltd, London, vol. 36(11), pages 1907-1928, November.
  • Handle: RePEc:pio:envira:v:36:y:2004:i:11:p:1907-1928
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    Citations

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    Cited by:

    1. Diaz-Serrano, Luis & Rodríguez-Pose, Andrés, 2011. "Decentralization, Happiness and the Perception of Institutions," IZA Discussion Papers 5647, Institute for the Study of Labor (IZA).
    2. Luis Diaz‐Serrano & Andrés Rodríguez‐Pose, 2012. "Decentralization, Subjective Well‐Being, and the Perception of Institutions," Kyklos, Wiley Blackwell, vol. 65(2), pages 179-193, May.
    3. Ahmad, Ehtisham & Brosio, Giorgio, 2009. "Decentralization and local service provision: what do we know?," LSE Research Online Documents on Economics 38347, London School of Economics and Political Science, LSE Library.
    4. Luis Diaz-Serrano & Andrés Rodríguez-Pose, 2015. "Decentralization and the Welfare State: What Do Citizens Perceive?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 120(2), pages 411-435, January.
    5. Andrés Rodríguez-Pose & Anne Krøijer, 2009. "Fiscal Decentralization and Economic Growth in Central and Eastern Europe," Growth and Change, Wiley Blackwell, vol. 40(3), pages 387-417.
    6. Andrés Rodríguez-Pose & Roberto Ezcurra, 2011. "Is fiscal decentralization harmful for economic growth? Evidence from the OECD countries," Journal of Economic Geography, Oxford University Press, vol. 11(4), pages 619-643, July.
    7. Brosio, Giorgio & Zanola, Roberto, 2008. "The welfare costs of national standards: a contribution to the debate on the outcomes of de/centralization," POLIS Working Papers 113, Institute of Public Policy and Public Choice - POLIS.
    8. Mildred E. Warner, 2013. "Does local government size matter? Privatization and hybrid systems of local service delivery," Chapters,in: The Challenge of Local Government Size, chapter 11, pages 263-288 Edward Elgar Publishing.
    9. Yuanshuo Xu & Mildred E. Warner, 2015. "Understanding employment growth in the recession: the geographic diversity of state rescaling," Cambridge Journal of Regions, Economy and Society, Cambridge Political Economy Society, vol. 8(2), pages 359-377.
    10. Massimo Del Gatto, 2004. "Agglomeration, Integration, and Territorial Authority Scale in a System of Trading Cities. Centralisation versus Devolution," Working Papers 2004.93, Fondazione Eni Enrico Mattei.
    11. repec:oup:cjrecs:v:10:y:2017:i:3:p:559-573. is not listed on IDEAS
    12. K. L. Devkota, 2014. "Impact of Fiscal Decentralization on Economic Growth in the Districts of Nepal," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1420, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    13. Ehtisham Ahmad & Giorgio Brosio & Vito Tanzi, 2008. "Local Service Provision in Selected OECD Countries; Do Decentralized Operations Work Better?," IMF Working Papers 08/67, International Monetary Fund.
    14. Horváth, Gyula & Lóránd, Balázs, 2012. "Decentralizáció és gazdasági fejlődés. Az olasz példa
      [Decentralization and economic development. The case of Italy]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1273-1298.
    15. Santiago Lago-Peñas & Jorge Martinez-Vazquez (ed.), 2013. "The Challenge of Local Government Size," Books, Edward Elgar Publishing, number 15294.
    16. Serhan Cevik, 2011. "Policy Coordination in Fiscal Federalism; Drawing Lessons From the Dubai Debt Crisis," IMF Working Papers 11/147, International Monetary Fund.
    17. Anwar Shah & Theresa Thompson & Heng-fu Zou, 2004. "Decentralising the public sector: The Impact of Decentralisation on Service Delivery, Corruption, Fiscal Management and Growth in Developing and Emerging Market Economies: A Synthesis of Empirical Evi," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 2(1), pages 10-14, October.
    18. International Monetary Fund, 2011. "United Arab Emirates; Selected Issues and Statistical Appendix," IMF Staff Country Reports 11/112, International Monetary Fund.
    19. ., 2014. "Devolution, city governance and economic performance," Chapters,in: Urban Economics and Urban Policy, chapter 7, pages 157-184 Edward Elgar Publishing.

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