Can fiscal decentralisation curb fiscal imbalances?

Grazyna Bukowska () and Joanna Siwinska-Gorzelak

No 2016-35, Working Papers from Faculty of Economic Sciences, University of Warsaw

Abstract: The aim of this paper is to study the impact of fiscal decentralisation on fiscal discipline. We use annual data for more than 2400 Polish municipalities, over the years 2002-2014. We introduce the distinction between “de facto” and “de jure” fiscal decentralisation, what is the first novelty of this study. The second novelty is that we control for the characteristics of the political scene and include interactions of decentralisation and political variables. We show that higher decentralisation is associated with higher fiscal discipline and that this result is robust for all our decentralisation measures. We also show that the impact of decentralisation is different, depending on the characteristics of the local political scene. Therefore, its overall effect on fiscal balance is not necessarily straightforward.

Keywords: deficit; fiscal decentralization; political competition (search for similar items in EconPapers)
JEL-codes: D72 H72 H77 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2016
New Economics Papers: this item is included in nep-pbe, nep-pol and nep-ure
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http://www.wne.uw.edu.pl/index.php/download_file/3201/ First version, 2016 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:war:wpaper:2016-35

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