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 3: Decentralisation, Infrastructure Investment and Educational Performance You or your institution have access to this content

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Author(s):
Kaja Fredriksen1
Author Affiliations
  • 1: OECD, France

Publication Date
03 June 2013
Bibliographic information
No.:
16
Pages
20
DOI
10.1787/5k4559gg7wlw-en

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Theories of fiscal competition between jurisdictions suggest that investment in productive relative to consumptive spending is higher in a decentralised setting, and that efficiency of the public sector is also higher. This paper empirically analyses the link between decentralisation and the composition of public spending as well as the relation between decentralisation and educational performance. The results suggest that fiscal decentralisation increases the share of public funds directed to capital spending and that the bulk of this shift is due to higher education spending. Using an education production function approach and PISA results (Programme of International Student Assessment) as an indicator of educational output, the results suggest that educational performance is significantly higher in decentralised countries, even when controlling for spending and other variables affecting education. A 10% point increase in decentralisation increases educational performance by four PISA points, thereby improving the PISA ranking by around four country positions on average. Decentralisation to lower government levels and decentralisation to the school level (school autonomy) have a similar impact on educational performance.
Keywords:
public investment, fiscal decentralisation, PISA, education decentralisation, fiscal federalism
JEL Classification:
  • H11: Public Economics / Structure and Scope of Government / Structure, Scope, and Performance of Government
  • H75: Public Economics / State and Local Government; Intergovernmental Relations / State and Local Government: Health; Education; Welfare; Public Pensions
  • I22: Health, Education, and Welfare / Education and Research Institutions / Educational Finance