The Impact of the Centralization of Revenues and Expenditures on Growth, Regional Inequality and Inequality
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Authors
Landon, Stuart
Reid, Bradford G.
Date
2005
Type
working paper
Language
en
Keyword
Alternative Title
Abstract
This paper focuses on determining the effect of the centralization/decentralization of government activity on economic growth, regional inequality and household inequality. While there is a small empirical literature that examines the relationship between decentralization and growth, we are not aware of any empirical studies that explicitly examine the relationship between different degrees of fiscal decentralization and regional or household inequality.
Using data for 13 OECD countries, the empirical analysis generated no pervasive evidence that revenue centralization or expenditure centralization is associated with faster or slower growth. On the other hand, the analysis found that lower levels of regional inequality are associated with both revenue centralization and expenditure decentralization. This result is consistent with the view that revenue decentralization exacerbates regional disparities when fiscal capacity is unevenly distributed across regions. A somewhat surprising result was obtained for the case of household equality where it was found that increased revenue centralization is associated with more inequality.
Description
© 2005 IIGR, Queen’s University
Citation
Publisher
Queen's University Institute of Intergovernmental Relations