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What Drives Fiscal Decentralisation?

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Abstract

This paper investigates the determinants of fiscal decentralisation, focusing in particular on the impact of the level of income on the level of fiscal decentralisation. Various measures of fiscal decentralisation, several of them novel in this context, are employed in a cross-country econometric model to test established and more recent hypotheses. Paying careful attention to variable measurement, model specification and sample coverage, the results suggest that there are significant relationships between a range of factors, including income, geographical size, population density, population diversity, military expenditure, the structure of the public sector and openness to trade, and fiscal decentralisation. However, these relationships may be more complicated than previously reported. For the entire sample and for the OECD subsample a positive relationship between income and decentralisation is found, which corroborates the results found in earlier studies. However, for the middle and lower income nations, higher income is found to be associated with less decentralisation.

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  • Philip Bodman & Kathryn Ford & Tom Gole & Andrew Hodge, "undated". "What Drives Fiscal Decentralisation?," MRG Discussion Paper Series 3009, School of Economics, University of Queensland, Australia.
  • Handle: RePEc:qld:uqmrg6:30
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    File URL: http://www.uq.edu.au/economics/mrg/3009.pdf
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    References listed on IDEAS

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    Cited by:

    1. Davide Furceri & Agnese Sacchi & Simone Salotti, 2016. "Can Fiscal Decentralization Alleviate Government Consumption Volatility?," Open Economies Review, Springer, vol. 27(4), pages 611-636, September.
    2. Phil Bodman & Harry Campbell & Thanh Le, "undated". "Public Investment, Taxation, and Growth in Economies with Multi-leveled Governments," MRG Discussion Paper Series 4512, School of Economics, University of Queensland, Australia.

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