Decentralized Governance and Preferences for Public Goods
McNab, Robert M.
Arze del Granado, F. Javier
MetadataShow full item record
The theoretical and policy literature on decentralization has long asserted since Oates (1972) that decentralized governance increases allocative efficiency in the public sector. But, despite the colossal growth in the literature on decentralization and fiscally decentralized systems in the real world over the past four decades, this hypothesis has gone untested, largely because of the difficulties of deriving measures of allocative efficiency. In this paper we offer an indirect test of the allocative efficiency hypothesis by examining how decentralized governance affects the expression of preferences for public goods. Specifically, we examine the relationship between fiscal decentralization and the functional composition of public expenditures. Using a distance-sensitive representative agent model, we hypothesize that higher levels of fiscal decentralization induce agents to demand increased production of publicly provided private goods. We test this hypothesis using an unbalanced panel data set of 59 developed and developing countries covering a 30-year period. We find that expenditure decentralization positively and significantly influences the share of health and education expenditures in the consolidated government budgets; this finding is robust across multiple estimators. Decentralized governance thus appears to alter the composition of public expenditures towards publicly provided private goods.
Showing items related by title, author, creator and subject.
Ganapathiraju, Srinivas; Miske, Robert (Monterey, California. Naval Postgraduate School, 2012-12);The recent experience of nation building in Iraq, and more so in Afghanistan, calls for a deeper analysis of the pre-conditions for establishing an appropriate form of governance in post-conflict ethnically divided societies. ...
Naval Postgraduate School Center for Homeland Defense and Security (CHDS) (Monterey, California. Naval Postgraduate SchoolCenter for Homeland Defense and Security, 2010-09);September 2010. The articles and essays in this issue of Homeland Security Affairs all reflect – in some manner – on how we, as a nation, approach the process of homeland security. Ranging from specific suggestions for ...
Swearingen, Brent D. (Monterey, California: Naval Postgraduate School, 2015-12);This thesis examines how having authority to make decisions in different levels of an organization affects performance. The homeland security implications of this study are that the agencies responsible for homeland security ...