Fiscal Decentralisation and Regional Disparities

Abstract

JT03401144Complete document available on OLIS in its original format This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. ECO/WKP(2016) The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.Latvia was not an OECD Member at the time of preparation of this publication. Accordingly, Latvia does not appear in the list of OECD Members and is not included in the zone aggregates. © OECD (2016)You can copy, download or print OECD content for your own use, and you can include excerpts from OECD publications, databases and multimedia products in your own documents, presentations, blogs, websites and teaching materials, provided that suitable acknowledgment of OECD as source and copyright owner is given. All requests for commercial use and translation rights should be submitted to rights@oecd.org ECO/WKP(2016)54 3 ABSTRACT Fiscal Decentralisation and Regional DisparitiesFiscal decentralisation can lead to a more efficient provision of local public goods and services and promote a better match between policies and citizens' preferences. At the same time, however, there are concerns about whether all regions will gain from more autonomy. Decentralisation may not lift all boats, with "poor" regions losing competitiveness with respect to better endowed ones, thus increasing regional disparities. The present work investigates the relationship between fiscal decentralisation and regional inequality within countries. Particular attention is paid to the different channels through which decentralisation can affect disparities: taxing powers, spending autonomy and the vertical fiscal imbalance. The empirical analysis, which is conducted on a sample of 30 OECD countries for the period 1995-2011, suggests that a balanced fiscal structure, where local spending is mainly financed by local taxation, reduces regional disparities, by providing an incentive to better use local resources and implement policies that favour economic development.Keywords: Fiscal decentralisation, regional inequality, panel data JEL Classification: H71; H77; R11 ***** RESUME Décentralisation budgétaire et disparités régionalesSi la décentralisation budgétaire peut permettre d'améliorer l'efficience de la fourniture des biens et services publics locaux et promouvoir une meilleure adéquation entre les politiques publiques et les préférences des citoyens, la question de savoir si toutes les régions peuvent tirer parti d'une plus grande autonomie est source de préoccupation. Il est possible que la décentralisation ne profite pas à toutes les régions, et qu'elle se traduise, pour les régions « pauvres » par une perte de compétitivité par rapport à d'autres mi...

The estimation of sectoral contribution to regional divergence in Poland and Ukraine

“…The number of causes of regional divergence identified by these methods is quite large. Thus, Bartolini et al (2016) tent. Simultaneously, budget expenditures make the development of regions even more uneven in terms of socio-economic indicators.…”

Strategic Investment Packages

“…While economic disparities among OECD countries have been diminishing, the long-term trend of increasing inequality among regions has continued. Economic disparities between regions are now higher than they were a decade or two ago (Bartolini et al, 2016). This trend is reflected in significant regional disparities in labour productivity across the OECD ( Figure 1.1).…”

An integrated approach to assessing the level of fiscal policy decentralization

“…Savy, Pauliat, and Senimon (2016) examined the decentralization processes in Europe, concluding that they are non-linear and different, depending on the size of the region, the traditions of self-government, the role of the central government, and other political, social, economic, and cultural characteristics. Bartolini, Stossberg, and Blöchliger (2016) have argued that fiscal policy decentralization reforms must be two-sided: the growth of local budget revenues should be matched by adjustment of intergovernmental transfers and fiscal equalization. Bartolini, Stossberg, and Blöchliger (2016) examined the relationship between regional inequality in the countries and the state of fiscal decentralization.…”

“…Bartolini, Stossberg, and Blöchliger (2016) have argued that fiscal policy decentralization reforms must be two-sided: the growth of local budget revenues should be matched by adjustment of intergovernmental transfers and fiscal equalization. Bartolini, Stossberg, and Blöchliger (2016) examined the relationship between regional inequality in the countries and the state of fiscal decentralization. The results of an analysis of 30 OECD countries in 1995-2011 have shown that in those countries where local government budgets are mainly financed by local taxes, local resources are used more effectively, and fiscal policy is stepping up territorial development.…”