Decentralization and the Productive Efficiency of Government: Evidence from Swiss Cantons
University of Pennsylvania - Management Department; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)
University of Warwick - Department of Economics; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)
IZA Discussion Paper No. 2477
Advocates of fiscal decentralization argue that amongst other benefits, it can increase the efficiency of delivery of government services. This paper is one of the first to evaluate this claim empirically by looking at the association between expenditure decentralization and the productive efficiency of government using a data-set of Swiss cantons. We first provide careful evidence that expenditure decentralization is a powerful proxy for legal local autonomy. Further panel regressions of Swiss cantons provide robust evidence that more decentralization is associated with higher educational attainment. We also show that these gains lead to no adverse effects across education types but that male students benefited more from educational decentralization closing, for the Swiss case, the gender education gap.
Number of Pages in PDF File: 31
Keywords: decentralization, productive efficiency, local public goods
JEL Classification: H40, H52, H70, I20
Date posted: December 12, 2006
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