Economics at your fingertips  

Fiscal Decentralisation and Income Inequality: Empirical Evidence from OECD Countries

Stossberg Sibylle () and Hansjörg Blöchliger
Additional contact information
Stossberg Sibylle: Bundesministerium der Finanzen, Wilhelmstr. 97, 10117Berlin, Germany

Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), 2017, vol. 237, issue 3, 225-273

Abstract: Fiscal decentralisation might be partially responsible for rising income inequality by exacerbating competition between sub-national governments and compromising national government’s ability to redistribute. This paper investigates the relationship between fiscal decentralisation and economy-wide disposable income inequality. Drawing on a dataset of up to 20 OECD countries and covering the period 1996 to 2011, the analysis links a set of income inequality indicators and a wide array of fiscal decentralisation indicators. Results indicate that decentralisation might actually reduce income inequality, as measured by the Gini coefficient, but the effect is rather small and unstable across specifications. Fine-graining the analysis by using income percentile ratios, in turn, produces more significant and stable results. As such, the effects of fiscal decentralisation are not the same along the income distribution. While decentralisation tends to be associated with a reduction in income inequality between high incomes and the median, it is linked to a divergence of low income groups from the median, notably via sub-central tax autonomy. Transfers between levels of government also tend to be associated with an increase in the gap between lower and middle incomes. Interpreting these effects jointly, it seems that mainly middle income earners benefit from fiscal decentralisation.

Keywords: fiscal decentralisation; disposable income inequality; intergovernmental transfers; tax autonomy; income percentile ratios; regional inequality (search for similar items in EconPapers)
JEL-codes: D63 H10 H70 H71 H75 I38 (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link) ... -1108.xml?format=INT (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
Working Paper: Fiscal decentralisation and income inequality: Empirical evidence from OECD countries (2016) Downloads
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:

Ordering information: This journal article can be ordered from

Access Statistics for this article

Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik) is currently edited by Peter Winker

More articles in Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik) from De Gruyter
Bibliographic data for series maintained by Peter Golla ().

Page updated 2020-07-06
Handle: RePEc:jns:jbstat:v:237:y:2017:i:3:p:225-273:n:5