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Decentralization and the Productive Efficiency of Government: Evidence from Swiss Cantons

  • Barankay, Iwan


    (University of Pennsylvania)

  • Lockwood, Ben


    (University of Warwick)

Advocates of fiscal decentralization argue that amongst other benefits, it can increase the efficiency of delivery of government services. This paper is one of the first to evaluate this claim empirically by looking at the association between expenditure decentralization and the productive efficiency of government using a data-set of Swiss cantons. We first provide careful evidence that expenditure decentralization is a powerful proxy for legal local autonomy. Further panel regressions of Swiss cantons provide robust evidence that more decentralization is associated with higher educational attainment. We also show that these gains lead to no adverse effects across education types but that male students benefited more from educational decentralization closing, for the Swiss case, the gender education gap.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2477.

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Length: 31 pages
Date of creation: Dec 2006
Date of revision:
Publication status: published in: Journal of Public Economics, 2007, 91 (5-6), 1197-1218
Handle: RePEc:iza:izadps:dp2477
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  1. Barankay, Iwan & Lockwood, Ben, 2006. "Decentralization and the Productive Efficiency of Government: Evidence from Swiss Cantons," CEPR Discussion Papers 5639, C.E.P.R. Discussion Papers.
  2. Gilbert, Guy & Picard, Pierre, 1996. "Incentives and optimal size of local jurisdictions," European Economic Review, Elsevier, vol. 40(1), pages 19-41, January.
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  8. Sebastian Galiani & Ernesto Schargrodsky, 2002. "Evaluating the Impact of School Decentralization on Educational Quality," ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, vol. 0(Spring 20), pages 275-314, January.
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  11. Jean Hindriks & Ben Lockwood, 2005. "Decentralization and Electoral Accountability: Incentives, Separation, and Voter Welfare," Working Papers 2006-02, University of Kentucky, Institute for Federalism and Intergovernmental Relations.
  12. Timothy Besley & Michael Smart, 2005. "Fiscal restraints and voter welfare," LSE Research Online Documents on Economics 3769, London School of Economics and Political Science, LSE Library.
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  15. Ben Lockwood, 2002. "Distributive Politics and the Costs of Centralization," Review of Economic Studies, Oxford University Press, vol. 69(2), pages 313-337.
  16. Ebel, Robert D. & Yilmaz, Serdar, 2002. "On the measurement and impact of fiscal decentralization," Policy Research Working Paper Series 2809, The World Bank.
  17. Seabright, Paul, 1994. "Accountability and Decentralization in Government: An Incomplete Contracts Model," CEPR Discussion Papers 889, C.E.P.R. Discussion Papers.
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  26. repec:oup:qjecon:v:112:y:1997:i:4:p:1027-56 is not listed on IDEAS
  27. John Joseph Wallis & Wallace E. Oates, 1988. "Decentralization in the Public Sector: An Empirical Study of State and Local Government," NBER Chapters, in: Fiscal Federalism: Quantitative Studies, pages 5-32 National Bureau of Economic Research, Inc.
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  29. Eric A. Hanushek, 2002. "The Failure of Input-based Schooling Policies," NBER Working Papers 9040, National Bureau of Economic Research, Inc.
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