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Fiscal Decentralization and Deficits : International Evidence

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  • Bilin Neyapti

Abstract

This paper investigates macroeconomic effects of fiscal decentralization, which has been a neglected area of research. Panel evidence for 16 countries over 1980-1998 indicates that expenditure and revenue decentralization reduce budget deficits. A principal finding is that the fiscal disciplining effect of fiscal decentralization increases with population size. Interestingly, absence of local elections is associated with greater effectiveness of fiscal decentralization. The benefits of expenditure decentralization decrease with ethnolinguistic fractionalization and quality of governance.
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  • Bilin Neyapti, 2008. "Fiscal Decentralization and Deficits : International Evidence," Working Papers 0802, Department of Economics, Bilkent University.
    • Handle: RePEc:bil:wpaper:0802
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    File URL: http://www.bilkent.edu.tr/~economics/papers/08-02%20DP_BilinNeyapti.pdf
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    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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