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The Impact of Fiscal Decentralization: A Survey

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  • Jorge Martinez-Vazquez

    (International Center for Public Policy (Georgia State University) & Governance and Economics research Network (GEN))

  • Santiago Lago-Peñas

    (GEN, IEB, and University of Vigo)

  • Agnese Sacchi

    (Universitas Mercatorum (Italy) and GEN)

Abstract

In this paper we offer a comprehensive and updated review of the impact of fiscal decentralization on the economy, society and politics. We start with the examination of two crucial and yet unsolved issues in the literature on decentralization: its proper measurement and the potential endogeneity of fiscal decentralization with many of the variables of interest we are trying to investigate. Then we discuss the main findings in the existing literature on the effects of decentralization on a relevant list of socio-economic variables. The impact of fiscal decentralization reforms on political institutions is also considered. Complete answers to the many questions on the impact of fiscal decentralization are not likely to be certain but overall there are reasons to be optimistic about the overall positive impact of the decentralized systems that have been introduced all over the world in the past several decades. The survey offered in this paper by necessity has to be selective but it presents a balanced view of what is known and what is not yet known opening room for further research and practice on fiscal decentralization.

Suggested Citation

  • Jorge Martinez-Vazquez & Santiago Lago-Peñas & Agnese Sacchi, 2015. "The Impact of Fiscal Decentralization: A Survey," Working papers 29, Società Italiana di Economia Pubblica.
    • Handle: RePEc:ipu:wpaper:29
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    More about this item

    Keywords

    fiscal federalism; governance; political decentralization; sub-national governments; macroeconomic stability; economic growth; public policies; politics; corruption; regional disparities; inequality;
    All these keywords.

    JEL classification:

    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • 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

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