Does the Fiscal Decentralization Promote Public Safety? Evidence from United States

Abstract

This paper empirically investigates the effect of fiscal decentralization on public safety, which is widely taken as an important issue in evaluating the performance of public service. In addition, we provide evidence to the transmission channels of the decentralization effect. In a decentralized setting, the fiscal competition between jurisdictions motivates local governments to provide better crime control service, but as illustrated in this paper, the externality in the prevention of mobile crime can offset the beneficial effect of jurisdictional competition. Using panel data for the United States from 1990 to 2009, we find the fiscal decentralization generally lowers the crime rate, but the effect is smaller for mobile crime than immobile crime. The findings provide strong empirical support to our hypothesis and the underlying mechanism, and the results are robust to various fiscal decentralization measures and model specifications.

Keywords: Fiscal Decentralization, Crime rate, Mobility of Crime

JEL Classification: H54, H77, K42