Fiscal Decentralization and Regional Disparity: Evidence from Cross-Section and Panel Data

36 Pages Posted: 12 Oct 2006 Last revised: 9 Oct 2009

See all articles by Christian Lessmann

Christian Lessmann

Technology University of Braunschweig; Ifo Branch Dresden; CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Date Written: October 7, 2009

Abstract

The advantages and disadvantages of public sector decentralization are widely discussed in economics and political science. Some authors argue that decentralization leads to an optimal provision of public services and promotes economic growth, while others emphasize the dangers of competition between sub-national governments, especially those associated with interregional redistribution. Using cross-section and panel data for 23 OECD countries from 1982 to 2000, this paper empirically studies the impact of fiscal decentralization on regional disparities. We find that a higher degree of decentralization is associated with lower regional disparities. Hence, poor regions experience no disadvantages from decentralization and instead appear to benefit.

Keywords: decentralization, regional disparity, inequaltity, fiscal federalism, panel data evidence

JEL Classification: H72, H77, R11, R50

Suggested Citation

Lessmann, Christian, Fiscal Decentralization and Regional Disparity: Evidence from Cross-Section and Panel Data (October 7, 2009). Available at SSRN: https://ssrn.com/abstract=936874 or http://dx.doi.org/10.2139/ssrn.936874

Christian Lessmann (Contact Author)

Technology University of Braunschweig ( email )

Abt-Jerusalem-Str. 7
Braunschweig, D-38106
Germany

Ifo Branch Dresden ( email )

Poschinger Str. 5
Munich, 01069
Germany

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

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