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dc.contributor.authorMcNab, Robert M.
dc.contributor.authorArze del Granado, F. Javier
dc.contributor.authorMartinez-Vazquez, Jorge
dc.dateOctober 18, 2012
dc.date.accessioned2016-06-13T16:16:40Z
dc.date.available2016-06-13T16:16:40Z
dc.date.issued2012-10-18
dc.identifier.citationOnline at https://mpra.ub.uni-muenchen.de/42459/ MPRA Paper No. 42459, posted 6. November 2012 11:20 UTCen_US
dc.identifier.urihttp://hdl.handle.net/10945/48922
dc.description.abstractThe 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.en_US
dc.format.extent45 p.en_US
dc.rightsThis publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.en_US
dc.titleDecentralized Governance and Preferences for Public Goodsen_US
dc.contributor.corporateNaval Postgraduate School (U.S.)en_US
dc.contributor.departmentGlobal Public Policy Academic Group (GPPAG)en_US
dc.subject.authorFiscal Decentralizationen_US
dc.subject.authorFunctional Compositionen_US
dc.subject.authorPure Public Goodsen_US
dc.subject.authorPublicly Provided Private Goodsen_US
dc.subject.authorEducationen_US
dc.subject.authorHealthen_US


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