In government we trust: The role of fiscal decentralization |
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| Affiliation: | 1. Tilburg University, CentER and Department of Economics, P.O. Box 90153, 5000 LE Tilburg, The Netherlands;2. World Bank, Finance and Private Sector Development Research Group, 1818 H Street NW, Washington, DC 20433, USA;1. Department of Economics, University of Hagen, Universitätsstr. 41, 58097 Hagen, Germany;2. Department of Economics, University of Siegen, Hölderlinstr. 3, 57068 Siegen, Germany;1. Department of Economics, University of Sussex, United Kingdom;2. Research Department, IMF;1. World Bank, United States and MIT, United States;2. IE University, Spain and Harvard University, United States |
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| Abstract: | This paper looks whether fiscal decentralization is associated with trust of citizens in government related institutions. We expect a positive relationship based on the argument of governments' improved responsiveness to preferences of citizens that is perceived to result from more decentralized fiscal systems. Survey data from up to 42 countries over the period 1994–2007 confirm this positive relationship. It is robust to controlling for unobserved country heterogeneity and a wide array of other explanatory variables that are associated with trust in government related institutions. Moreover, we do not find that the positive association with fiscal decentralization extends to other, non-government related institutions. |
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