Income inequality, regional disparities and fiscal decentralization in industrialized countries

Agnese Sacchi
Authors registered in the RePEc Author Service: Simone Salotti

No 142, Departmental Working Papers of Economics - University 'Roma Tre' from Department of Economics - University Roma Tre

Abstract: In this paper we investigate the interactions among fiscal decentralization, income inequality and regional disparities, using a sample of 23 OECD countries over the period 1971-2000. We first explore the effects of fiscal decentralization on overall income inequality. We then test whether regional economic disparities influence the fiscal decentralization process. We use novel and robust measures of fiscal decentralization based on differences in the degree of both expenditure and tax autonomy. We also conduct several robustness checks to tackle the potential endogeneity and reverse causality issues. Our results highlight the importance both of the nature of fiscal decentralization – expenditure versus taxation – and of the extent to which responsibility and decision powers are really left to subcentral governaments. While a higher degree of tax decentralization is associated with higher overall income inequality within a country, high regional disparities seem to be correlated with lower expenditure decentralization.

Keywords: tax decentralization; expenditure decentralization; regional economic disparities (search for similar items in EconPapers)
JEL-codes: D31 H70 H77 R12 (search for similar items in EconPapers)
Date: 2011-12
New Economics Papers: this item is included in nep-geo, nep-pbe, nep-pub and nep-ure
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:rtr:wpaper:0142

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