Fiscal Decentralization, Economic Freedom, and Political and Civil Liberties in the Americas

This paper analyzes the impact of fiscal decentralization on economic freedom and political and civil liberties in the Americas. Regarding the latter and with the full sample of countries, the findings suggest that decentralization initially worsens but eventually improves political and civil liberties, underlining the importance of fiscal decentralization as a driver for achieving basic liberties. When Canada and the US are excluded, the evidence shows that decentralization may eventually be a detriment for political and civil liberties. With respect to the impact of fiscal decentralization on economic freedom, decentralization first hinders but eventually increases freedom when all countries are included, emphasizing the point that a decentralization regime takes time to develop and function properly. When Canada and the US are excluded, decentralization initially increases but ultimately hampers freedom, demonstrating that if the decentralization regime does not address important matters like fiscal discipline, wealth inequality, and political accountability, economic freedom - like political and civil liberties - will also deteriorate.