Decentralization and Political Institutions

49 Pages Posted: 3 Jun 2003

See all articles by Ruben Enikolopov

Ruben Enikolopov

Institute of Political Economy and Governance; New Economic School; ICREA; Universitat Pompeu Fabra; Barcelona GSE

Ekaterina Zhuravskaya

Paris School of Economics (PSE)

Multiple version iconThere are 2 versions of this paper

Date Written: April 2003

Abstract

Does fiscal decentralization result in more efficient governance and higher economic growth? This Paper empirically tests the hypothesis posed by theoretical literature that the effect of economic decentralization depends on features of the political institutions. Using data from 95 countries for the last 25 years, we show that the effect of decentralization on economic growth, quality of government, and public goods provision strongly depends on the following two aspects of political centralization: 1) weakness/strength of the party system (measured by fractionalization of parliament and age of main parties); and 2) subordination (whether local- and province-level executives are appointed or elected). We find solid support for Riker's theory (1964). Strong parties in developing and transition countries significantly improve the results of fiscal decentralization for economic growth, quality of government, and public goods provision. In addition, subordination of local authorities to higher-level governments improves the effect of decentralization on growth and government quality, while its effect on public goods provision depends on particular type of public good considered.

Keywords: Decentralization, political institutions, parties, quality of government, growth

JEL Classification: H10, H40, H70

Suggested Citation

Enikolopov, Ruben and Zhuravskaya, Ekaterina, Decentralization and Political Institutions (April 2003). CEPR Discussion Paper No. 3857. Available at SSRN: https://ssrn.com/abstract=413203

Ruben Enikolopov (Contact Author)

Institute of Political Economy and Governance ( email )

Ramon Trias Fargas, 25-27
Barcelona, 08005
Spain

New Economic School ( email )

Skolkovskoe shosse 45
Moscow, Skolkovo 143026
Russia

ICREA ( email )

Passeig Lluís Companys, 23
Barcelona, 08010
Spain

Universitat Pompeu Fabra ( email )

Ramon Trias Fargas, 25-27
Barcelona, E-08005
Spain

Barcelona GSE ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

Ekaterina Zhuravskaya

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

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