Decentralizing Development: The Economic Impacts of Government Splits

Ricardo Dahis and Christiane Szerman

American Economic Journal: Applied Economics, 2026, vol. 18, issue 3, 220-53

Abstract: Changes in political boundaries aimed at devolving power to local governments are common across many countries. We examine the economic impacts of government unit creation through splitting. Exploiting reforms that led to sharp increases in the number of municipalities in Brazil, we show that voluntary splitting enlarges the public sector, enhances public service delivery, and stimulates long-term economic activity in new local governments. These gains are not offset by losses elsewhere and are stronger in peripheral, remote, and underdeveloped areas neglected by parent governments. Higher fiscal revenues and decentralized decision-making contribute to the positive effects on local economic activity.

JEL-codes: D72 H41 H75 H76 H77 Q53 R51 (search for similar items in EconPapers)
Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/app.20240009 (application/pdf)
https://doi.org/10.3886/E209961V1 (text/html)
https://www.aeaweb.org/articles/materials/25520 (application/pdf)
https://www.aeaweb.org/articles/materials/25521 (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

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:aea:aejapp:v:18:y:2026:i:3:p:220-53

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

DOI: 10.1257/app.20240009

Access Statistics for this article

American Economic Journal: Applied Economics is currently edited by Alexandre Mas

More articles in American Economic Journal: Applied Economics from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().