The theory of fiscal decentralization

Bilin Neyapti ()

Chapter 2 in Understanding Fiscal Decentralization, 2025, pp 13-50 from Edward Elgar Publishing

Abstract: The theory of fiscal decentralization (FD) originates from federalism, although it is not confined to federal systems. This chapter reviews the FD literature, beginning with the first-generation FD literature and the decentralization theorem, and extending to the second-generation FD literature. Drawing on the analytical tools provided by the rational expectations revolution, the second-generation FD literature has enabled the development of extensive formal analyses of the conditions under which FD can improve welfare.

Keywords: Decentralization theorem; First Generation Fiscal Decentralization; Second Generation Fiscal Decentralization (search for similar items in EconPapers)
Date: 2025
ISBN: 9781803925561
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