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Decentralisation and fiscal performance in Central and Eastern Europe

Author

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  • Suzana Makreshanska-Mladenovska
  • Goran Petrevski

Abstract

This paper provides empirical evidence on the association between decentralisation and budget deficits of the general government for a panel of 11 former transition countries during 1991–2018, controlling for the effects of various demographic, institutional, and macroeconomic variables. We provide evidence that decentralising government activities in Central and Eastern Europe (CEE) has favourable effects on the fiscal position of general government. Also, we show that the greater reliance on intergovernmental grants as a source of finance of local governments does not have detrimental effects on the overall fiscal discipline. Therefore, we cannot support the so-called ‘common pool’ hypothesis, which predicts that intergovernmental transfers lead to higher public expenditure, thus exacerbating the fiscal imbalances of the general government. On the other hand, we show that the effects of revenue decentralisation depend critically on the specific measure of local government revenue.

Suggested Citation

  • Suzana Makreshanska-Mladenovska & Goran Petrevski, 2021. "Decentralisation and fiscal performance in Central and Eastern Europe," Post-Communist Economies, Taylor & Francis Journals, vol. 33(5), pages 614-636, July.
    • Handle: RePEc:taf:pocoec:v:33:y:2021:i:5:p:614-636
    DOI: 10.1080/14631377.2020.1793609
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    Cited by:

    1. Bian, Zhiqiang & Zhang, Caibin, 2025. "Do different decentralization reforms prohibit or inhibit Chinese corporate carbon emission intensities?," Economic Analysis and Policy, Elsevier, vol. 85(C), pages 1176-1196.
    2. Yvonne Hegele & Valbona Karakaçi & Achim Lang & Arberesha Mushani, 2024. "Compliance with national standards of decentralized public services: The case of preschool services in Albania," Public Administration & Development, Blackwell Publishing, vol. 44(2), pages 75-90, May.

    More about this item

    JEL classification:

    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H76 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Other Expenditure Categories
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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