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Fiscal decentralization and public sector efficiency: evidence from OECD countries

  • Antonis Adam
  • Manthos Delis
  • Pantelis Kammas


This paper studies the impact of fiscal decentralization on public sector efficiency (PSE). We first use a theoretical framework that illustrates the two opposing forces that shape a non-monotonic effect of fiscal decentralization on PSE. Subsequently, we carry out an empirical analysis for 21 OECD countries, between 1970 and 2000. A country-level dataset is used to measure PSE in delivering education and health services and the new indices are regressed on well-established decentralization measures. Irrespective of whether PSE concerns education or health services, an inverted U-shaped relationship has been identified between government efficiency in providing these services and fiscal decentralization. This relationship is robust across several different specifications and estimation methods. Copyright Springer-Verlag Berlin Heidelberg 2014

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Article provided by Springer in its journal Economics of Governance.

Volume (Year): 15 (2014)
Issue (Month): 1 (February)
Pages: 17-49

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Handle: RePEc:spr:ecogov:v:15:y:2014:i:1:p:17-49
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