Fiscal Performance and Intergovernmental Fiscal Relations in Developing Countries

Jedah Nyaboe Ogweno and Gervasio Semedo
Additional contact information
Gervasio Semedo: LEO - Laboratoire d'Économie d'Orleans [2022-...] - UO - Université d'Orléans - UT - Université de Tours - UCA - Université Clermont Auvergne

Post-Print from HAL

Abstract: This paper investigates the effect of fiscal decentralization on public finance performance for two levels of government on a panel of 33 developing economies from 2000 to 2020. Using the bias-corrected Least Square Dummy Variable estimator (LSDVC), we demonstrate that fiscal decentralization could enhance fiscal performance. The main findings are as follows: First, a larger share of decentralized expenditure is associated with a stronger central fiscal balance, but this effect diminishes with increased vertical fiscal imbalances (transfer dependency of subnational governments). The findings also show that vertical fiscal imbalances and revenue decentralization undermine fiscal positions at the central government level. At the sub-national level, we find a U-shaped relation between revenue autonomy (measured as the sub-national governments' share of tax revenues) and sub-national budget deficits. Nonetheless, deficits of sub-national governments can be avoided through increased local accountability, for example, by having regional governments' executive and legislative officials locally elected.

Date: 2025-02-09
References: Add references at CitEc
Citations:

Published in Public Finance Review, 2025, 53 (4), pp.468-505. ⟨10.1177/10911421241305733⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
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:hal:journl:hal-05072756

DOI: 10.1177/10911421241305733

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().