Regional inequalities, fiscal decentralization and government quality
Regional inequalities, fiscal decentralization and government quality. Regional Studies. There are theoretical arguments supporting the view that regional income inequalities, the degree of fiscal decentralization and the quality of government are simultaneously determined. This article argues that existing empirical work has failed to deal adequately with this possibility. In light of this, it applies a simultaneous equation model, which accounts for the joint determination of these three variables, to a panel of 23 Organisation for Economic Co-operation and Development (OECD) countries. The empirical evidence that emerges from the analysis suggests that a process of fiscal decentralization, accompanied by measures to improve the quality of government, would be an effective strategy for reducing regional inequalities.
Funding
The authors acknowledge the financial assistance from the Instituto de Estudios Fiscales (Madrid). They are also grateful for the financial support from the Ministerio de Economía y Competitividad – Spain [grant number ECO2012-31081]; the Direcció General de Recerca – Spain [grant numbers 2014 SGR 239 and XREPP]; as well as the project ‘Calidad de gobierno, gasto público social y financiamiento: impacto en la trayectoria de crecimiento económico de países de América Latina, 1950–2011’ of the Comisión Sectorial de Investigación Científica – Universidad de la República, Uruguay. The usual disclaimers apply.
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