 Fiscal Performance and Intergovernmental Fiscal Relations in Developing CountriesJedah Nyaboe Ogweno and Gervasio Semedo Public Finance Review, 2025, vol. 53, issue 4, 468-505 Abstract: This paper investigates the effect of fiscal decentralization on public finance performance for two levels of government on a panel of 33 developing economies from 2000 to 2020. Using the bias-corrected Least Square Dummy Variable estimator (LSDVC), we demonstrate that fiscal decentralization could enhance fiscal performance. The main findings are as follows: First, a larger share of decentralized expenditure is associated with a stronger central fiscal balance, but this effect diminishes with increased vertical fiscal imbalances (transfer dependency of subnational governments). The findings also show that vertical fiscal imbalances and revenue decentralization undermine fiscal positions at the central government level. At the sub-national level, we find a U-shaped relation between revenue autonomy (measured as the sub-national governments’ share of tax revenues) and sub-national budget deficits. Nonetheless, deficits of sub-national governments can be avoided through increased local accountability, for example, by having regional governments’ executive and legislative officials locally elected. Keywords: national deficits; sub-national deficits; expenditure decentralization; revenue autonomy (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:sae:pubfin:v:53:y:2025:i:4:p:468-505 DOI: 10.1177/10911421241305733 Access Statistics for this article More articles in Public Finance Review |
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