The economic returns of decentralisation: government quality and the role of space

Rodríguez-Pose, Andrés ORCID: 0000-0002-8041-0856 and Muštra, Vinko (2022) The economic returns of decentralisation: government quality and the role of space. Environment and Planning A, 54 (8). 1604 - 1622. ISSN 0308-518X

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Abstract

Research on the impact of decentralisation has generally overlooked the fact that the economic returns of transferring powers and resources to subnational tiers of government greatly depend on the quality of the devolved government. Scholarly literature has also neglected that these returns may be similarly affected by the autonomy of neighbouring areas and their government quality. In this paper, we use panel data fixed effects analyses and spatial Durbin econometric models to assess the extent to which the economic returns of political and fiscal decentralisation in the European Union between 2000 and 2015 are mediated by local government quality and that of neighbouring regions. The results suggest that the economic benefits of regional autonomy are greater in regions with a better government quality, while regions with a low quality of government grow less, regardless of their level of decentralisation. The gains of decentralisation mainly accrue through indirect effects, as regions grow more if surrounded by other, more decentralised regions than through their own level of decentralisation. In all cases, local government quality is a powerful driver of growth, irrespective of whether a region is considered individually or in relationship to its neighbours.

Item Type:	Article
Official URL:	https://journals.sagepub.com/home/epn
Additional Information:	© 2022 The Authors
Divisions:	Geography & Environment
Subjects:	H Social Sciences > HB Economic Theory J Political Science > JS Local government Municipal government
JEL classification:	H - Public Economics > H7 - State and Local Government; Intergovernmental Relations > H72 - State and Local Budget and Expenditures H - Public Economics > H7 - State and Local Government; Intergovernmental Relations > H77 - Intergovernmental Relations; Federalism; Secession R - Urban, Rural, and Regional Economics > R5 - Regional Government Analysis > R58 - Regional Development Policy R - Urban, Rural, and Regional Economics > R1 - General Regional Economics > R11 - Regional Economic Activity: Growth, Development, and Changes
Date Deposited:	21 Jul 2022 13:39
Last Modified:	18 Apr 2024 00:33
URI:	http://eprints.lse.ac.uk/id/eprint/115619

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