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Can fiscal decentralisation curb fiscal imbalances?

Author

Listed:
  • Grażyna Bukowska

    (Faculty of Economic Sciences, University of Warsaw)

  • Joanna Siwińska-Gorzelak

    (Faculty of Economic Sciences, University of Warsaw)

Abstract

The aim of this paper is to study the impact of fiscal decentralisation on fiscal discipline. We use annual data for more than 2400 Polish municipalities, over the years 2002-2014. We introduce the distinction between “de facto” and “de jure” fiscal decentralisation, what is the first novelty of this study. The second novelty is that we control for the characteristics of the political scene and include interactions of decentralisation and political variables. We show that higher decentralisation is associated with higher fiscal discipline and that this result is robust for all our decentralisation measures. We also show that the impact of decentralisation is different, depending on the characteristics of the local political scene. Therefore, its overall effect on fiscal balance is not necessarily straightforward.

Suggested Citation

  • Grażyna Bukowska & Joanna Siwińska-Gorzelak, 2016. "Can fiscal decentralisation curb fiscal imbalances?," Working Papers 2016-35, Faculty of Economic Sciences, University of Warsaw.
    • Handle: RePEc:war:wpaper:2016-35
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    File URL: http://www.wne.uw.edu.pl/index.php/download_file/3201/
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    More about this item

    Keywords

    deficit; fiscal decentralization; political competition;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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