Fiscal decentralisation in times of financial crises

David Bartolini (), Agnese Sacchi, Simone Salotti and Raffaella Santolini

No 1506, Working Papers. Collection A: Public economics, governance and decentralization from Universidade de Vigo, GEN - Governance and Economics research Network

Abstract: The virtues of fiscal decentralisation are usually assessed against the provision of local public goods, little is said about its impact on public finances. There is, however, a growing concern that central governments losing control over part of the budget could negatively affect public finances, especially in times of adverse financial conditions. The present work shows that these concerns are misplaced. The empirical investigation on 19 OECD countries, over the period 1980-2010, shows that expenditure decentralisation improves the central budget balance without prejudice for local budgets, thus improving the overall country’s fiscal position. This effect is reinforced when combined with tax autonomy. During periods of financial crises, the disciplinary role of fiscal decentralisation appears to be even stronger, raising concerns about the recentralisation trend recently pursued by some advanced economies precisely to face fiscal distress and economic stagnation.

Keywords: Fiscal decentralisation; government budget balance; banking crisis. (search for similar items in EconPapers)
JEL-codes: G01 H6 H7 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2015-07
New Economics Papers: this item is included in nep-pbe and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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http://infogen.webs.uvigo.es/WP/WP1506.pdf First version, 2015 (application/pdf)

Related works:
Journal Article: Fiscal Decentralization in Times of Financial Crises (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:gov:wpaper:1506

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