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Fiscal Decentralization and Life Satisfaction in Chile

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  • Leonardo Letelier S.

    (Institute of Public Affairs, University of Chile)

  • José Luis Sáez Lozano

    (Department of International and Spanish Economics, University of Granada)

Abstract

This research hinges upon the relationship between fiscal decentralization (FD) and subjective well-being (SWB) in Chile. We merge data from two household surveys (2011 and 2013) in which a life satisfaction question was included, with municipal-level information. By using a FD proxy that measures the share of municipal unconditional grants on all revenues, we produce an instrumental variable to test in the context of an ordered logistic multilevel model. Our contribution is twofold. First, we find evidence that, on average, FD does affect SWB positively. Second, we find this effect to depend on the satisfaction group in which individuals belong. Evidence from this study indicates that the effect in question is non-linear and that only high SWB groups are clearly benefitted. Since this reflects different priorities across SWB groups, this paper’s evidence is a call for a more aggressive inter-municipal fiscal equalization scheme.

Suggested Citation

  • Leonardo Letelier S. & José Luis Sáez Lozano, 2020. "Fiscal Decentralization and Life Satisfaction in Chile," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper2007, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    • Handle: RePEc:ays:ispwps:paper2007
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