Partial fiscal decentralization and demand responsiveness of the local public sector: Theory and evidence from Norway

Lars-Erik Borge (), Jan Brueckner and Jorn Rattso

Journal of Urban Economics, 2014, vol. 80, issue C, 153-163

Abstract: This paper provides an empirical test of a principal tenet of fiscal federalism: that spending discretion, when granted to localities, allows public-good levels to adjust to suit local demands. The test is based on a simple model of partial fiscal decentralization, under which earmarking of central transfers for particular uses is eliminated, allowing funds to be spent according to local tastes. The greater role of local demand determinants following partial decentralization is confirmed by the paper’s empirical results, which show the effects of the 1986 Norwegian reform.

Keywords: Fiscal decentralization; Tiebout; Norway (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (41)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:juecon:v:80:y:2014:i:c:p:153-163

DOI: 10.1016/j.jue.2014.01.003

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