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Fiscal Decentralisation and Inclusive Growth

image of Fiscal Decentralisation and Inclusive Growth

Intergovernmental fiscal frameworks, as considered by the OECD Network on Fiscal Relations Across Levels of Government, are a core driver of inclusive growth. Certain institutions and policies can contribute to a more equitable distribution of economic gains across jurisdictions and income groups, such as equalisation systems. In particular, the quality of public sector outcomes depends on how responsibilities and functions such as education or health care are shared across government levels. This implies that intergovernmental fiscal frameworks, which drive the division of roles of the central and sub-national governments, critically influence growth and the inclusiveness of an economy. This book brings together academics and practitioners to address key aspects of intergovernmental fiscal relations and country experience, as they relate to inclusive growth.

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Fiscal decentralisation and inclusive growth: Considering education

This chapter focuses on whether fiscal decentralisation can help to promote the sustainability of education funding. The linkage between fiscal decentralisation and education expenditure and performance is examined using data from OECD countries. The results clearly show the positive effect of fiscal decentralisation on education expenditure. In addition, the results reveal how regional disparities in the distribution of the total national budget, affects education expenditure. The findings suggest that fiscal decentralisation and balanced regional development may increase the solidity of education expenditure. Regional disparities reduce the efficient allocation of the national budgets and may cause declining education expenditure. This empirical study confirms that OECD countries tend to spend more money on education in order to provide educational opportunitites for lower income populations, when income inequality worsens.

English

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