Fiscal decentralization and public sector efficiency: evidence from OECD countries |
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Authors: | Antonis Adam Manthos D Delis Pantelis Kammas |
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Institution: | 1. Department of Economics, University of Ioannina, P.O. Box: 1186, 45110, Ioannina, Greece 2. Surrey Business School, University of Surrey, Guildford, Surrey, GU2 7XH, UK
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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. |
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