Fiscal Decentralization, Commitment and Regional Inequality: Evidence from State-level Cross-sectional Data for the United States

Nobuo Akai () and Masayo Hosio ()
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Masayo Hosio: Otemon Gakuin University

Journal of Income Distribution, 2009, vol. 18, issue 1, 113-129

Abstract: Conventional approaches to fiscal decentralization suggest that decentralization lowers the power of redistribution, but recent theories argue that fiscal decentralization can work as a commitment device. The former effect is argued to cause an increase in inter-county inequality, while the latter suggests a decrease. This article first clarifies the relationship between fiscal decentralization and inter-county inequality by using cross-sectional data for the United States. Our result indicates that the achievement of autonomy by fiscal decentralization in poor (low-income) counties contributes to decreased inter-county inequality, but that this effect is not as large as the dominating adverse effect fiscal decentralization has on rich (highincome) counties.

Keywords: fiscal decentralization; inter-county inequality; commitment (search for similar items in EconPapers)
JEL-codes: H71 H72 H73 H77 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (15)

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