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Economic Integration and Fiscal Decentralization: Evidence from OECD Countries

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  • Stegarescu, Dan

Abstract

Drawing on recent work on the creation and breakup of countries, this paper examines the impact of economic and political integration on the vertical government structure. It argues that by increasing the market size and the benefits from the decentralized provision of public goods, integration might have triggered the recent process of fiscal decentralization in OECD countries. Based on a theoretical framework, the empirical panel analysis relates the degree of public sector decentralization to economic and European integration, controlling for inter-regional heterogeneity, economies of scale, and institutions. The results found mostly support a decentralizing effect of economic and European integration, particularly in the context of preference heterogeneity, whereas participation of sub-national governments in central decision-making is associated with increasing centralization.

Suggested Citation

  • Stegarescu, Dan, 2004. "Economic Integration and Fiscal Decentralization: Evidence from OECD Countries," ZEW Discussion Papers 04-86, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  • Handle: RePEc:zbw:zewdip:2890
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    Cited by:

    1. repec:rom:mrpase:v:9:y:2017:i:2:p:47-66 is not listed on IDEAS
    2. Baskaran, Thushyanthan, 2009. "Supranational Integration And National Reorganization," MPRA Paper 21597, University Library of Munich, Germany.
    3. Federico Etro, 2006. "Political geography," Public Choice, Springer, vol. 127(3), pages 321-343, June.
    4. Freinkman, Lev & Plekhanov, Alexander, 2009. "Fiscal Decentralization in Rentier Regions: Evidence from Russia," World Development, Elsevier, vol. 37(2), pages 503-512, February.
    5. Matt Andrews, 2008. "The Good Governance Agenda: Beyond Indicators without Theory," Oxford Development Studies, Taylor & Francis Journals, vol. 36(4), pages 379-407.
    6. Antonio SCIALA' & Paolo LIBERATI, "undated". "The Impact of Economic Openness on the Vertical Structure of the Public Sector," EcoMod2008 23800129, EcoMod.
    7. Dima, Bogdan & Dima, Ştefana Maria & Barna, Flavia, 2014. "The signaling effect of tax rates under fiscal competition: A (Shannonian) transfer entropy approach," Economic Modelling, Elsevier, vol. 42(C), pages 373-381.
    8. Thushyanthan Baskaran, 2010. "Supranational integration and national reorganization: On the Maastricht treaty’s impact on fiscal decentralization in EU countries," Constitutional Political Economy, Springer, vol. 21(4), pages 309-335, December.
    9. Stegarescu, Dan, 2005. "Centralizing Tendencies in the Public Sector in Germany," ZEW Discussion Papers 05-46, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    10. Freinkman, Lev & Plekhanov, Alexander, 2005. "What determines the extent of fiscal decentralization ? The Russian paradox," Policy Research Working Paper Series 3710, The World Bank.

    More about this item

    Keywords

    Fiscal Decentralization; Economic Integration; European Union; ?Sandwich? Hypothesis;

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • F15 - International Economics - - Trade - - - Economic Integration

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