OECD Working Papers on Fiscal Federalism

ISSN :
2226-5848 (online)
DOI :
10.1787/22265848
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The Fiscal Federalism Working Paper series covers issues related to intergovernmental fiscal relations and local/regional public finance, such as: tax and spending assignment across government levels; intergovernmental grants; fiscal equalization; local and regional public service efficiency; inter-jurisdictional tax competition; and macroeconomic issues such as intergovernmental fiscal management and sub-central fiscal rules.
Note. Nos 1, 6 and 8 are available in OECD Economics Department Working Papers, as Nos 465, 626 and 705.
 

Decentralisation and Economic Growth - Part 1: How Fiscal Federalism Affects Long-Term Development You or your institution have access to this content

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Author(s):
Hansjörg Blöchliger1
Author Affiliations
  • 1: OECD, France

Publication Date
03 June 2013
Bibliographic information
No.:
14
Pages
23
DOI
10.1787/5k4559gx1q8r-en

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Intergovernmental fiscal frameworks usually reflect fundamental societal choices and history and are not foremost geared towards achieving economic policy objectives. Yet, like most institutional arrangements, fiscal relations affect the behaviour of firms, households and governments and thereby economic activity. This paper presents empirical research on the potential effects of fiscal decentralisation on a set of outcomes such as GDP, productivity, public investment and school performance. The results can be summarised as follows: decentralisation, as measured by revenue or spending shares, is positively associated with GDP per capita levels. The impact seems to be stronger for revenue decentralisation than for spending decentralisation. Decentralisation is strongly and positively associated with educational outcomes as measured by international student assessments (PISA). While educational functions can be delegated either to sub-central governments (SCG) or to schools, the results suggest that both strategies appear to be equally beneficial for educational performance. Finally, investment in physical and – especially – human capital as a share of general government spending is significantly higher in more decentralised countries.
Keywords:
public spending, fiscal federalism, fiscal decentralisation, education decentralisation
JEL Classification:
  • H10: Public Economics / Structure and Scope of Government / General
  • H70: Public Economics / State and Local Government; Intergovernmental Relations / General
  • I22: Health, Education, and Welfare / Education and Research Institutions / Educational Finance