Partial Fiscal Decentralization and Sub-National Government Fiscal Discipline: Empirical Evidence from OECD Countries

Zareh Asatryan, Lars Feld and Benny Geys

No 5279, CESifo Working Paper Series from CESifo

Abstract: Recent theoretical research suggests that financing sub-national governments’ expenditure out of own revenue sources is linked to more responsible budgeting, because the financial implications of spending decisions then are internalized within a jurisdiction. We test this proposition empirically on a sample of 23 OECD countries over the 1975-2000 period, and find evidence in line with the hypothesis that greater revenue decentralization (measured as sub-national governments’ share of own source tax revenues in general government tax revenue) is associated with improved sub-national government budget deficits/surpluses. This finding is cross-validated with a novel, independent dataset consisting of all 34 OECD member states from 2002 to 2008.

Keywords: fiscal federalism; revenue autonomy; budget deficits (search for similar items in EconPapers)
JEL-codes: E61 H62 H71 H77 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (29)

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Journal Article: Partial fiscal decentralization and sub-national government fiscal discipline: empirical evidence from OECD countries (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_5279

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