The economic returns of decentralisation: government quality and the role of space

Andrés Rodríguez-Pose and Vinko Muštra

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Research on the impact of decentralisation has generally overlooked the fact that the economic returns of transferring powers and resources to subnational tiers of government greatly depend on the quality of the devolved government. Scholarly literature has also neglected that these returns may be similarly affected by the autonomy of neighbouring areas and their government quality. In this paper, we use panel data fixed effects analyses and spatial Durbin econometric models to assess the extent to which the economic returns of political and fiscal decentralisation in the European Union between 2000 and 2015 are mediated by local government quality and that of neighbouring regions. The results suggest that the economic benefits of regional autonomy are greater in regions with a better government quality, while regions with a low quality of government grow less, regardless of their level of decentralisation. The gains of decentralisation mainly accrue through indirect effects, as regions grow more if surrounded by other, more decentralised regions than through their own level of decentralisation. In all cases, local government quality is a powerful driver of growth, irrespective of whether a region is considered individually or in relationship to its neighbours.

Keywords: decentralization; quality of government; growth; spatial dependency; regions; EU; Decentralisation; Sage deal (search for similar items in EconPapers)
JEL-codes: H72 H77 R11 R58 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2022-11-01
New Economics Papers: this item is included in nep-geo and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Environment and Planning A, 1, November, 2022, 54(8), pp. 1604 - 1622. ISSN: 0308-518X

Downloads: (external link)
http://eprints.lse.ac.uk/115619/ Open access version. (application/pdf)

Related works:
Journal Article: The economic returns of decentralisation: Government quality and the role of space (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:115619

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().