IDEAS home Printed from https://ideas.repec.org/p/bil/wpaper/0802.html
   My bibliography  Save this paper

Fiscal Decentralization and Deficits : International Evidence

Author

Listed:
  • Bilin Neyapti

Abstract

This paper investigates macroeconomic effects of fiscal decentralization, which has been a neglected area of research. Panel evidence for 16 countries over 1980-1998 indicates that expenditure and revenue decentralization reduce budget deficits. A principal finding is that the fiscal disciplining effect of fiscal decentralization increases with population size. Interestingly, absence of local elections is associated with greater effectiveness of fiscal decentralization. The benefits of expenditure decentralization decrease with ethnolinguistic fractionalization and quality of governance.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Bilin Neyapti, 2008. "Fiscal Decentralization and Deficits : International Evidence," Working Papers 0802, Department of Economics, Bilkent University.
  • Handle: RePEc:bil:wpaper:0802
    as

    Download full text from publisher

    File URL: http://www.bilkent.edu.tr/~economics/papers/08-02%20DP_BilinNeyapti.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Tanzi, Vito, 2008. "The future of fiscal federalism," Discussion Papers, Research Unit: Market Processes and Governance SP II 2008-03, Social Science Research Center Berlin (WZB).
    2. Fisman, Raymond & Gatti, Roberta, 2002. "Decentralization and corruption: evidence across countries," Journal of Public Economics, Elsevier, vol. 83(3), pages 325-345, March.
    3. Bouton, Laurent & Gassner, Marjorie & Verardi, Vincenzo, 2008. "Redistributing income under fiscal vertical imbalance," European Journal of Political Economy, Elsevier, vol. 24(2), pages 317-328, June.
    4. Luiz R. De Mello Jr., 2004. "Can Fiscal Decentralization Strengthen Social Capital?," Public Finance Review, , vol. 32(1), pages 4-35, January.
    5. Antonis Adam & Manthos Delis & Pantelis Kammas, 2014. "Fiscal decentralization and public sector efficiency: evidence from OECD countries," Economics of Governance, Springer, vol. 15(1), pages 17-49, February.
    6. King, David & Ma, Yue, 2001. "Fiscal decentralization, central bank independence, and inflation," Economics Letters, Elsevier, vol. 72(1), pages 95-98, July.
    7. Timothy Goodspeed, 2002. "Bailouts in a Federation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(4), pages 409-421, August.
    8. Panizza, Ugo, 1999. "On the determinants of fiscal centralization: Theory and evidence," Journal of Public Economics, Elsevier, vol. 74(1), pages 97-139, October.
    9. Chen, Kang, 2004. "Fiscal centralization and the form of corruption in China," European Journal of Political Economy, Elsevier, vol. 20(4), pages 1001-1009, November.
    10. Tanzi, Vito, 2008. "The future of fiscal federalism," European Journal of Political Economy, Elsevier, vol. 24(3), pages 705-712, September.
    11. Davoodi, Hamid & Zou, Heng-fu, 1998. "Fiscal Decentralization and Economic Growth: A Cross-Country Study," Journal of Urban Economics, Elsevier, vol. 43(2), pages 244-257, March.
    12. Jin, Jing & Zou, Heng-fu, 2002. "How does fiscal decentralization affect aggregate, national, and subnational government size?," Journal of Urban Economics, Elsevier, vol. 52(2), pages 270-293, September.
    13. International Monetary Fund, 2000. "Can Fiscal Decentralization Strengthen Social Capital?," IMF Working Papers 00/129, International Monetary Fund.
    14. Jorge Martínez Vázquez & Robert M. McNab, 2006. "Fiscal decentralization, macrostability and growth," Hacienda Pública Española, IEF, vol. 179(4), pages 25-49, September.
    15. de Mello, Luiz Jr, 2000. "Fiscal Decentralization and Intergovernmental Fiscal Relations: A Cross-Country Analysis," World Development, Elsevier, vol. 28(2), pages 365-380, February.
    16. Oates, Wallace E., 1993. "Fiscal Decentralization and Economic Development," National Tax Journal, National Tax Association, vol. 46(2), pages 237-43, June.
    17. Era Dabla-Norris & Jorge Martinez-Vazquez & John Norregaard, 2000. "Making Decentralization Work: The Case of Russia, Ukraine, and Kazakhstan," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0009, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    18. Cukierman, Alex & Webb, Steven B & Neyapti, Bilin, 1992. "Measuring the Independence of Central Banks and Its Effect on Policy Outcomes," World Bank Economic Review, World Bank Group, vol. 6(3), pages 353-398, September.
    19. Neyapti, Bilin, 2004. "Fiscal decentralization, central bank independence and inflation: a panel investigation," Economics Letters, Elsevier, vol. 82(2), pages 227-230, February.
    20. Brambor, Thomas & Clark, William Roberts & Golder, Matt, 2006. "Understanding Interaction Models: Improving Empirical Analyses," Political Analysis, Cambridge University Press, vol. 14(01), pages 63-82, December.
    21. William Easterly & Ross Levine, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1203-1250.
    22. Kappeler, Andreas & Välilä, Timo, 2008. "Fiscal federalism and the composition of public investment in Europe," European Journal of Political Economy, Elsevier, vol. 24(3), pages 562-570, September.
    23. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 38(2), pages 112-134.
    24. Ulrich Thießen, 2003. "Fiscal Decentralisation and Economic Growth in High-Income OECD Countries," Fiscal Studies, Institute for Fiscal Studies, vol. 24(3), pages 237-274, September.
    25. Olivier Blanchard & Andrei Shleifer, 2001. "Federalism With and Without Political Centralization: China Versus Russia," IMF Staff Papers, Palgrave Macmillan, vol. 48(4), pages 1-8.
    26. Faguet, Jean-Paul, 2001. "Does decentralization increase responsiveness to local needs? - evidence from Bolivia," Policy Research Working Paper Series 2516, The World Bank.
    27. Oates, Wallace E., 1993. "Fiscal Decentralization and Economic Development," National Tax Journal, National Tax Association;National Tax Journal, vol. 46(2), pages 237-243, June.
    28. Bardhan, Pranab & Mookherjee, Dilip, 1998. "Expenditure Decentralization and the Delivery of Public Services in Developing Countries," Center for International and Development Economics Research (CIDER) Working Papers 233623, University of California-Berkeley, Department of Economics.
    29. Zhang, Xiaobo, 2006. "Fiscal decentralization and political centralization in China: Implications for growth and inequality," Journal of Comparative Economics, Elsevier, vol. 34(4), pages 713-726, December.
    30. Andreas Kyriacou & Oriol Roca sagalés, 2009. "Fiscal descentralization and the quality of government: evidence from panel data," Hacienda Pública Española, IEF, vol. 189(2), pages 131-155, June.
    31. John D. Donahue, 1997. "Tiebout? Or Not Tiebout? The Market Metaphor and America's Devolution Debate," Journal of Economic Perspectives, American Economic Association, vol. 11(4), pages 73-81, Fall.
    32. Ebel, Robert D. & Yilmaz, Serdar, 2002. "On the measurement and impact of fiscal decentralization," Policy Research Working Paper Series 2809, The World Bank.
    33. Feltenstein, Andrew & Iwata, Shigeru, 2005. "Decentralization and macroeconomic performance in China: regional autonomy has its costs," Journal of Development Economics, Elsevier, vol. 76(2), pages 481-501, April.
    34. Kempe Ronald Hope, 2000. "Decentralisation and local governance theory and the practice in Botswana," Development Southern Africa, Taylor & Francis Journals, vol. 17(4), pages 519-534.
    35. International Monetary Fund, 2001. "Fiscal Decentralization and Governance; A Cross-Country Analysis," IMF Working Papers 01/71, International Monetary Fund.
    36. Dan Stegarescu, 2009. "The effects of economic and political integration on fiscal decentralization: evidence from OECD countries," Canadian Journal of Economics, Canadian Economics Association, vol. 42(2), pages 694-718, May.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bil:wpaper:0802. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (C Pakel). General contact details of provider: http://edirc.repec.org/data/debiltr.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.