Cookies?
Library Header Image
LSE Research Online LSE Library Services

Fiscal decentralisation, efficiency, and growth

Rodríguez-Pose, Andrés, Tijmstra, Sylvia A. R. and Bwire, Adala (2009) Fiscal decentralisation, efficiency, and growth. Environment and Planning A, 41 (9). pp. 2041-2062. ISSN 0308-518X

Full text not available from this repository.

Abstract

Much of the recent worldwide trend towards devolution has been driven by the belief that fiscal decentralisation is likely to have a positive effect on government efficiency and economic growth. It is generally assumed that the transfer of powers and resources to lower tiers of government allows for a better matching of public policies to local needs and thus for a better allocation of resources. These factors, in turn, are expected to lead to an improvement in regional economic performance, if subnational authorities shift resources from current to capital expenditures in search of a better response to local needs. In this paper we test these assumptions empirically by analysing the evolution of subnational expenditure categories and regional growth in Germany, India, Mexico, Spain, and the USA. We find that, contrary to expectations, decentralisation has coincided in the sample countries with a relative increase in current expenditures at the expense of capital expenditures, which has been associated with lower levels of economic growth in countries where devolution has been driven from above (India and Mexico), but not in Spain, where it has been driven from below. We hypothesise that the differences in legitimacy between the central or federal government and subnational governments in top-down and bottom-up processes of devolution may be at the origin of the diverse capacity to deliver greater allocative and productive efficiency and, eventually, greater economic growth by devolved governments.

Item Type: Article
Official URL: http://www.envplan.com/A.html
Additional Information: © 2009 Pion
Library of Congress subject classification: H Social Sciences > HJ Public Finance
Sets: Departments > Geography and Environment
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: UT ISI:000270524700003
Date Deposited: 28 Nov 2009 14:54
URL: http://eprints.lse.ac.uk/25856/

Actions (login required)

Record administration - authorised staff only Record administration - authorised staff only