Fiscal Decentralization - a Survey of the Empirical Literature

Yaniv Reingewertz

MPRA Paper from University Library of Munich, Germany

Abstract: We survey the empirical literature on fiscal decentralization (FD) and analyze the advantages and disadvantages of shifting fiscal responsibilities to sub national governments. We suggest several conclusions: First, there are large disagreements regarding the influence of FD on the size of government and the effect of FD on tax competition, economic growth and corruption. Probably the only unanimous conclusion is that intergovernmental grants are heavily influenced by political considerations. The empirical literature deals with several additional issues which are related to FD. While the literature on these topics is more scant and is not always econometrically rigorous, it is also more in agreement: there is no evidence for a "race to the bottom" in welfare transfers due to FD; FD seems to increase inequality in developing countries but to decrease inequality in developed economies and there seem to be economies of scale in the provision of several local public services. We conclude that there is no general answer regarding the net effect of FD. Fiscal decentralization reforms have to consider a wide array of factors and local contingencies before a successful implementation could be made.

Keywords: Fiscal Decentralization; Federalism; Intergovernmental Grants; Sub National Governments. (search for similar items in EconPapers)
JEL-codes: E62 H11 H73 H77 (search for similar items in EconPapers)
Date: 2014-11-12
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:59889

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