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Fiscal Decentralization - a Survey of the Empirical Literature

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  • Reingewertz, Yaniv

Abstract

We survey the empirical literature on fiscal decentralization (FD) and analyze the advantages and disadvantages of shifting fiscal responsibilities to sub national governments. We suggest several conclusions: First, there are large disagreements regarding the influence of FD on the size of government and the effect of FD on tax competition, economic growth and corruption. Probably the only unanimous conclusion is that intergovernmental grants are heavily influenced by political considerations. The empirical literature deals with several additional issues which are related to FD. While the literature on these topics is more scant and is not always econometrically rigorous, it is also more in agreement: there is no evidence for a "race to the bottom" in welfare transfers due to FD; FD seems to increase inequality in developing countries but to decrease inequality in developed economies and there seem to be economies of scale in the provision of several local public services. We conclude that there is no general answer regarding the net effect of FD. Fiscal decentralization reforms have to consider a wide array of factors and local contingencies before a successful implementation could be made.

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  • Reingewertz, Yaniv, 2014. "Fiscal Decentralization - a Survey of the Empirical Literature," MPRA Paper 59889, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:59889
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    More about this item

    Keywords

    Fiscal Decentralization; Federalism; Intergovernmental Grants; Sub National Governments.;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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