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Decentralisation and income inequality in Central and Eastern European countries

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  • Suzana Makreshanska-Mladenovska
  • Goran Petrevski

Abstract

This paper provides empirical evidence for the association between fiscal decentralisation and income distribution for a panel of 11 economies from Central and Eastern Europe (CEE) during 1992–2016. We focus on three research topics: the effect of decentralisation on income inequality; the effects of the structure of subnational government finance on income inequality; and the validity of the Kuznets hypothesis. The main findings from the empirical exercise are as follows: first, we provide firm evidence on the presumed favourable effects of fiscal decentralisation on income distribution in the CEE countries; second, our empirical model suggests that the effects of fiscal decentralisation on income inequality are dependent on the source of finance of subnational governments, i.e. intergovernmental transfers may have a role in income equalisation; third, we cannot confirm the validity of the Kuznets hypothesis in CEE countries.

Suggested Citation

  • Suzana Makreshanska-Mladenovska & Goran Petrevski, 2019. "Decentralisation and income inequality in Central and Eastern European countries," Post-Communist Economies, Taylor & Francis Journals, vol. 31(1), pages 123-136, January.
  • Handle: RePEc:taf:pocoec:v:31:y:2019:i:1:p:123-136
    DOI: 10.1080/14631377.2018.1461526
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