Economics of Governance

, Volume 15, Issue 1, pp 17–49 | Cite as

Fiscal decentralization and public sector efficiency: evidence from OECD countries

Original Paper

Abstract

This paper studies the impact of fiscal decentralization on public sector efficiency (PSE). We first use a theoretical framework that illustrates the two opposing forces that shape a non-monotonic effect of fiscal decentralization on PSE. Subsequently, we carry out an empirical analysis for 21 OECD countries, between 1970 and 2000. A country-level dataset is used to measure PSE in delivering education and health services and the new indices are regressed on well-established decentralization measures. Irrespective of whether PSE concerns education or health services, an inverted U-shaped relationship has been identified between government efficiency in providing these services and fiscal decentralization. This relationship is robust across several different specifications and estimation methods.

Keywords

Public sector efficiency fiscal decentralization OECD countries 

JEL Classification

C14 C24 H11 H50 

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Copyright information

© Springer-Verlag Berlin Heidelberg 2013

Authors and Affiliations

  • Antonis Adam
    • 1
  • Manthos D. Delis
    • 2
  • Pantelis Kammas
    • 1
  1. 1.Department of EconomicsUniversity of IoanninaIoanninaGreece
  2. 2.Surrey Business SchoolUniversity of SurreyGuildfordUK

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