Decentralization and Local Governments' Performance: How Does Fiscal Autonomy Affect Spending Efficiency?

Lorenzo Boetti, Massimiliano Piacenza and Gilberto Turati ()

FinanzArchiv: Public Finance Analysis, 2012, vol. 68, issue 3, 269-302

Abstract: All over the world, recent legislative reforms share the goal of increasing fiscal autonomy of lower tiers of governments. The aim of this policy is to reduce vertical fiscal imbalance (VFI) and enhance the efficiency in the provision of public services, via increased accountability of local politicians. The purpose of this paper is to assess whether inefficiency of local governments is really affected by the degree of VFI, relying on a sample of Italian municipalities to study the determinants of spending performance. Consistently with modern fiscal federalism theories, our results show that more fiscally autonomous municipalities exhibit less inefficient behavior, thus supporting the waves of reforms towards the devolution of taxing power to lower government tiers.

Keywords: municipalities; decentralization; fiscal autonomy; electoral accountability; spending inefficiency (search for similar items in EconPapers)
JEL-codes: D78 H71 H72 R51 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (52)

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Working Paper: Decentralization and Local Governments' Performance: How Does Fiscal Autonomy Affect Spending Efficiency? (2010)
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DOI: 10.1628/001522108X653840

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