Unfunded mandates and the economic impact of decentralisation. When finance does not follow function

Andrés Rodríguez-Pose and Miquel Vidal-Bover

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Decentralisation has frequently been sold as a means to increase well-being and development. Yet, questions remain as to whether decentralisation improves economic performance. This is possibly because decentralisation processes have often led to ‘unfunded mandates’, that is, a mismatch between the powers transferred to subnational tiers of government and the resources allocated to them. In this article, we analyse how unfunded mandates shape regional economic growth across 518 regions in 30 Organisation for Economic Co-operation and Development countries over the period 1997–2018. There is a negative, statistically significant, and robust impact of unfunded mandates on economic growth. This effect is higher in more politically and less fiscally decentralised regions and in regions with a higher level of wealth. Unfunded mandates thus represent a serious drag on the potential positive economic effect of political decentralisation. Hence, for those benefits to materialise, better not more decentralisation – ensuring that finance follows function – should be pursued.

Keywords: political decentralisation; fiscal decentralisation; unfunded mandates; economic growth; regions; OECD; Staff Research Fund (search for similar items in EconPapers)
JEL-codes: H70 H77 O47 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2022-11-27
New Economics Papers: this item is included in nep-fdg, nep-geo and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Political Studies, 27, November, 2022, 72(2), pp. 652-676. ISSN: 0032-3217

Downloads: (external link)
http://eprints.lse.ac.uk/116908/ Open access version. (application/pdf)

Related works:
Working Paper: Unfunded mandates and the economic impact of decentralisation. When finance does not follow function (2022)
Working Paper: Unfunded mandates and the economic impact of decentralisation. When finance does not follow function (2022)
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: https://EconPapers.repec.org/RePEc:ehl:lserod:116908

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().