Economics of Governance

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

Fiscal decentralization and public sector efficiency: evidence from OECD countries

  • Antonis Adam
  • Manthos D. Delis
  • Pantelis Kammas
Original Paper


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.


Public sector efficiency fiscal decentralization OECD countries 

JEL Classification

C14 C24 H11 H50 



We are indebted to Jon Fiva, Ben Lockwood and Efthymios Tsionas for valuable suggestions and to Marius Busemeyer, Richard Jong-A-Pin, Dan Stegarescu and Jose Tavares for generously giving us access to their data. We have benefited from comments by Konstantinos Angelopoulos, Vangelis Dioikitopoulos, George Economides, Ben Lockwood, Thomas Moutos, Apostolis Philippopoulos, Thanasis Stengos and Nikos Tsakiris, as well as participants at the CESifo Delphi Conference on “Government, Institutions and Macroeconomic Performance”.


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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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