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Does decentralization improve the efficiency in the allocation of public investment? Evidence from Spain


  • Alejandro Esteller

    () (Institut d'Economia de Barcelona (IEB); Universitat de Barcelona (UB))

  • Albert Solé

    () (Institut d'Economia de Barcelona (IEB); Universitat de Barcelona (UB))


The well-known "Decentralization Theorem" (Oates, 1972) establishes the superiority of decentralized public provision over the centralized case, which is not so sensitive to the diversity of expenditure needs among territories. We test this hypothesis using a unique Spanish database that provides information on road and educational infrastructure investment and capital stocks by region both before and after the decentralization of such responsibilities. We find that investment in both categories is much more sensitive to regional output and to infrastructure users and costs when sub-central governments have the responsibility over such services.

Suggested Citation

  • Alejandro Esteller & Albert Solé, 2005. "Does decentralization improve the efficiency in the allocation of public investment? Evidence from Spain," Working Papers 2005/5, Institut d'Economia de Barcelona (IEB).
  • Handle: RePEc:ieb:wpaper:357450art73

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    References listed on IDEAS

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    Cited by:

    1. Kappeler, Andreas & Solé-Ollé, Albert & Stephan, Andreas & Välilä, Timo, 2013. "Does fiscal decentralization foster regional investment in productive infrastructure?," European Journal of Political Economy, Elsevier, vol. 31(C), pages 15-25.

    More about this item


    Decentralization; Growth; Human capital; Roads;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • I20 - Health, Education, and Welfare - - Education - - - General

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