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Local Decentralization and the Quality of Public Services in Europe

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Abstract

Most work studying the impact of fiscal decentralization on the provision of public services has measured the latter by way of quantitative output indicators (for example, years of schooling or mortality rates) and the former based on aggregate decentralization indicators reflecting sub-central government spending or revenue as a percentage of total spending or revenue. In this article, we reconsider the link between fiscal decentralization and public service provision based on perception-based measures of the quality of public services as well as decentralization measures that disaggregate spending according to expenditure functions. Specifically, we examine the impact of decentralizing spending in the areas of education, health and social protection down to local (municipal) governments, on perceptions concerning the quality of public services, across a panel of 30 European countries over the period 1996–2015. We find that decentralizing education and social protection spending improves the perceived quality of public services while decentralizing health expenditure undermines quality. Our empirical results are robust to the introduction of a range of potentially important covariates including measures that reflect on the degree of autonomy enjoyed by local authorities.

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Fig. 1

Source: Own elaboration based on World Governance Indicators

Fig. 2

Source: Own elaboration based on Eurostat

Fig. 3

Source: Own elaboration based on Eurostat

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Notes

  1. We know of no empirical efforts that consider the effect of decentralizing social protection spending.

  2. Both DEA and SFM, measure how to attain a given level of outputs with a minimum level of inputs (input approach) or the maximum attainable outputs for a given set of inputs (output approach).

  3. Sources include the African and Asian Development Banks, Freedom House, the International Country Risk Guide, Transparency International, the Economics Intelligence Unit, Latinobarometro and the World Economic Forum. See Table 1 in Kaufmann et al. (2010) for the 31 different sources used to construct the indicators.

  4. See the “Appendix” for the data sources and definitions as well as the summary statistics and the countries included in the sample (Tables 4, 5 and 6 respectively).

  5. The methodology employed by Ladner et al. (2016) to construct these indicators is inspired by, and is very similar to, that used by Hooghe et al. (2016) to measure autonomy or self-government at the regional level.

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Acknowledgements

We acknowledge financial assistance from the Institut d’Estudis de l’Autogovern (Generalitat de Catalunya) and ECO2016-75623-R (Ministerio de Economía y Competitividad). Any errors or omissions are, of course, entirely ours.

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Authors and Affiliations

  1. Departament d’Economia, Universitat de Girona, Campus de Montilivi, 17071, Girona, Spain

    Andreas P. Kyriacou

  2. Departament d’Economia Aplicada, Universitat Autònoma de Barcelona, Edifici B, Bellaterra, 08193, Barcelona, Spain

    Oriol Roca-Sagalés

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  1. Andreas P. Kyriacou
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Correspondence to Andreas P. Kyriacou.

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Appendix

Appendix

See Tables 4, 5, 6 and 7.

Table 4 Data sources and definitions
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Table 5 Summary statistics
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Table 6 Countries and codes
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Table 7 Local decentralization by functions and government effectiveness. Two stage least squares
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Kyriacou, A.P., Roca-Sagalés, O. Local Decentralization and the Quality of Public Services in Europe. Soc Indic Res 145, 755–776 (2019). https://doi.org/10.1007/s11205-019-02113-z

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