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Fiscal decentralization and regional disparity: Evidence from cross-section and panel data

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  • Lessmann, Christian

Abstract

The advantages and disadvantages of public sector decentralization are widely discussed in economics and political science. Some authors argue that decentralization leads to an optimal provision of public services and promotes economic growth, while others emphasize the dangers of competition between sub-national governments, especially those associated with interregional redistribution. Using cross-section and panel data for 23 OECD countries from 1982 to 2000, this paper empirically studies the impact of fiscal decentralization on regional disparities. We find that a higher degree of decentralization is associated with lower regional disparities. Hence, poor regions experience no disadvantages from decentralization and instead appear to benefit.

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  • Lessmann, Christian, 2009. "Fiscal decentralization and regional disparity: Evidence from cross-section and panel data," Dresden Discussion Paper Series in Economics 08/09, Technische Universität Dresden, Faculty of Business and Economics, Department of Economics.
    • Handle: RePEc:zbw:tuddps:0809
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    More about this item

    Keywords

    Decentralization; Regional Disparity; Inequality; Fiscal Federalism; Panel Data Evidence;
    All these keywords.

    JEL classification:

    • 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
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R50 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - General

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