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Fiscal Decentralisation and Public Investment: The Experience of Latin America


  • Luiz de Mello



Despite large differences across countries, Latin America’s average investment-to-GDP ratio and the overall quality of infrastructure in the region are relatively low by international comparison. Empirical evidence on the effects of fiscal decentralisation on investment based on a panel of Latin American countries since the late 1990 suggests that fiscal decentralisation discourages Latin American subnational governments from investing (acquiring fixed assets) and that lower subnational spending on investment is associated with lower economy-wide gross fixed capital formation. Latin American countries will therefore need to face a double challenge of revisiting the current arrangements for decentralised provision that discourage subnational governments from investing, while making the most of decentralisation as a policy lever to raise private investment. Décentralisation budgétaire et investissement public : L'expérience de l'Amérique latine Malgré des différences très marquées d’un pays à l’autre, le taux moyen d’investissement par rapport au PIB et la qualité globale des infrastructures de la région sont relativement faibles par comparaison internationale. Les données empiriques concernant les effets de la décentralisation budgétaire sur l’investissement pour un groupe de pays d’Amérique latine depuis la fin des années 90 montrent que la décentralisation budgétaire décourage les administrations infranationales de ces pays d’investir (c’est-à-dire d’acquérir des actifs immobilisés) et que de plus faibles dépenses d’investissement au niveau infranational se répercutent négativement sur la formation brute de capital fixe dans l’ensemble de l’économie. Les pays d’Amérique latine seront donc confrontés à un double défi : revoir les dispositifs actuels de décentralisation qui découragent les investissements des administrations infranationales et tirer le meilleur parti de la décentralisation comme moyen d’action pour accroître l’investissement privé.

Suggested Citation

  • Luiz de Mello, 2010. "Fiscal Decentralisation and Public Investment: The Experience of Latin America," OECD Economics Department Working Papers 824, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:824-en
    DOI: 10.1787/5km347r2hhbp-en

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    Cited by:

    1. Henry Aray & Janeth Pacheco-Delgado, 2022. "Fiscal Decentralization and the Allocation of Public Spending of Subnational Governments. The Case of Ecuador," ThE Papers 22/01, Department of Economic Theory and Economic History of the University of Granada..
    2. Ha T.T. Vu & Robert D. Ebel, 2014. "Rural Roads: Multi-Tier Monitoring of Infrastructure: Top Down and Bottom Up," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1415, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.

    More about this item


    Amérique latine; decentralisation; décentralisation; investissement public; Latin America; public investment;
    All these keywords.

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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