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Who honor the rules of federalism? Party system nationalization and fiscal performance

Listed author(s):
  • Santiago Lago-Peñas
  • Agnese Sacchi
  • Pablo Simon-Cosano

This paper explores the impact of decentralization on countries’ fiscal outcomes paying attention to one aspect usually neglected in the literature: the relevance of self-interested local politics. Relevance that can be proxied by the nationalization of political party systems, namely the extent to which parties compete nationally oriented. Based on a sample of developed and developing countries over the period 1970-2011, our findings are twofold. First, fiscal decentralization has a positive effect on general governments' primary balance. Second, primary balance is negatively affected by the nationalization of party systems only when the latter is extremely weak.

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File URL: http://infogen.webs.uvigo.es/WP/WP1409.pdf
File Function: First version, 2014
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Paper provided by Universidade de Vigo, GEN - Governance and Economics research Network in its series Working Papers. Collection A: Public economics, governance and decentralization with number 1409.

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Length: 30 pages
Date of creation: Nov 2014
Handle: RePEc:gov:wpaper:1409
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