Fiscal Decentralization and Governance: A Cross-Country Analysis

By Luiz de Mello, M. Barenstein. Social Science Research Network, 2001

199 citations recorded by the source corpus.

Based on cross-country data for up to 78 countries, this paper shows that fiscal decentralization-the assignment of expenditure and revenue mobilization functions to subnational levels of government-is associated with various indicators of governance, such as corruption, rule of law, and government effectiveness. Unlike previous studies in the decentralization/governance literature, which focus primarily on expenditure-based measures of decentralization, the results reported in this paper show that the relationship between decentralization and governance depends on how subnational expenditures are financed. The higher the share in total subnational revenues of nontax revenues and grants and transfers from higher levels of government, the stronger the association between decentralization and governance.

Subfields: Economics and Econometrics, Political Science and International Relations

View Paper: https://www.semanticscholar.org/paper/a7bfa3136e8da2a3ab633c1dcd587a2a45936e57

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Citations in the corpus

Decentralization and Political Institutions (2007, methodology): “The Hausman 36 Other studies (Fisman and Gatti, 2002; de Mello and Barenstein, 2001) used country legal origin as an instrument.”
Fiscal decentralization and deficits: International evidence (2010, background): “For these reasons, vertical and horizontal revenue sharing is generally necessary (see De Mello [2000a], De Mello and Barenstein [2001]).4 De Mello and Barenstein (2001), for example, show that, unlike expenditure decentralisation, the lower is revenue decentralisation, the better is governance.”
Can Fiscal Decentralization Strengthen Social Capital? (2004, unknown): “…those available from Kaufmann, Kraay, and ZoidoLobatón (1999a, 1999b), measuring rule of law, government effectiveness, voice and accountability, and political instability, have been experimented with in recent literature on decentralization and governance, including de Mello and Barenstein (2002).”
Pitfalls on the Road to Fiscal Decentralization (2002, background): “Inter alias, Brueckner (1999) and Triesman (1999) have supported the hypothesis; Fisman and Gatti (2000) and Gurgur and Shah (2000) have rejected it; and de Mello and Barenstein (2001) have reached more nuanced results.”
The Impact of Fiscal and Political Decentralization on Local Public Investments in Indonesia (2017, background): “Cross-country analyses also show various outcomes to be improving with fiscal decentralization (see e.g., Robalino et al. 2001, Khalegian 2004, and Jiménez-Rubio 2011 for health or Fisman and Gatti 2002 and de Mello and Barenstein 2001 for corruption).”
Political decentralization and corruption: Evidence from around the world (2009, background): “Focusing on fiscal decentralization, Huther and Shah (1998), De Mello and Barenstein (2001), Fisman and Gatti (2002), and Arikan (2004) all report that a larger subnational share of public expenditures (as measured in the IMF's Government Finance Statistics) was associated with lower perceived…”
Economic Analysis of Corruption: A Survey (2003, background): “Nonetheless, De Mello and Barenstein (2002) provide evidence from a cross section of countries that fiscal decentralisation is associated with lower levels of perceived corruption.”