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Does Fiscal Decentralization Strengthen Social Capital? Cross-Country Evidence and the Experiences of Brazil and Indonesia


  • Luiz de Mello

    () (OECD Economics Department)


This paper tests the hypothesis that, by giving people more voice in the government decision-making process, fiscal decentralisation fosters social capital, measured in terms of interpersonal trust. Empirical evidence based on World Values Survey data and seemingly unrelated probit estimations for a cross-section of countries suggests that people living in federal/decentralised countries find it more important than their counterparts living in unitary/centralised countries to have voice in government decisions, which, in turn, is associated with greater social capital. The cross-country estimations are complemented by country-specific regressions for Brazil and Indonesia on account of these countries’ experiences with fiscal decentralisation. The results show that the cohorts of individuals that have been exposed to decentralisation are in general more pro-voice (and trustful of strangers in the case of Brazil) than their counterparts that have not been exposed to decentralisation. These findings are not driven by the effects of political liberalisation on people’s attitudes towards the importance of having voice in government decisions and interpersonal trust.

Suggested Citation

  • Luiz de Mello, 2010. "Does Fiscal Decentralization Strengthen Social Capital? Cross-Country Evidence and the Experiences of Brazil and Indonesia," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1007, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  • Handle: RePEc:ays:ispwps:paper1007

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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. Ligthart, Jenny E. & van Oudheusden, Peter, 2015. "In government we trust: The role of fiscal decentralization," European Journal of Political Economy, Elsevier, vol. 37(C), pages 116-128.
    3. Canto, Olga & Adiego, Marta & Ayala, Luis & Levy, Horacio & Paniagua, Milagros, 2012. "Going regional. The effectiveness of different tax-benefit policies in combating child poverty in Spain," EUROMOD Working Papers EM2/12, EUROMOD at the Institute for Social and Economic Research.

    More about this item


    Federalism; decentralisation; social capital; Brazil; Indonesia;

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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