Regional Inequality and Decentralization: An Empirical Analysis

Abstract

This paper analyzes the impact of political and fi scal decentralization on regional inequalities, using a unique dataset which covers fi fty-four countries at diff erent stages of economic development. Cross-section and panel data estimations show that decentralization decreases regional inequalities in general. However, estimations using an interactionvariable approach imply that the eff ect depends on the level of economic development. While rich countries benefi t from decentralization in that they achieve a more equal regional income distribution, decentralization may lead to higher regional inequalities in developing and emerging economies. The results point in the same direction for measures of fi scal and political decentralization, implying that autonomy in both decision making and fi scal authority are decisive in this context. Thus, when fostering decentralization in developing countries as proposed by international development agencies, the potential negative redistributional consequences should be taken into account.

Regional Inequality and Internal Conflict

“…One instrument might be the decentralization of the public sector. A number of studies, such as Lessmann (), Rodríguez‐Pose and Ezcurra (), and Lessmann (), find decentralization to reduce regional inequalities overall, but the effects are not significant in developing countries. Therefore, this policy instrument is only suitable for high‐income countries.…”

State rescaling and economic convergence

“…Third, the findings also lend further support to econometric modelling-based studies of the impact of state rescaling on territorial cohesion (Rodríguez-Pose & Gill, 2005). As argued by Ezcurra and Pascual (2008), Lessmann (2009Lessmann ( , 2012 and Rodríguez-Pose and Ezcurra (2010), the devolution of fiscal power to subnational governments (i.e., the downscaling of statehood) tends to be negatively correlated with the level of regional inequality across industrially advanced Western societies: in rich countries, at least, a higher degree of decentralization is associated with lower regional imbalances. Nationally, Torrisi, Pike, Tomaney, and Tselios (2015) reported no evidence of the post-1996 devolution in Italy leading to an increase in regional disparities; quite the contrary, they found a reduction of dispersion of disposable household income per head over the period 1995-2007 (cf.…”

Descentralización fiscal, calidad de gestión de gobierno y disparidades regionales en Uruguay

“…Esta evidencia reporta una relación distinta entre descentralización fiscal y disparidades regionales según el nivel de desarrollo de los países. Más específicamente, la descentralización tiende a acentuar las desigualdades regionales en los países en vías de desarrollo, y las reduce en los países de ingresos altos (Rodríguez-Pose y Ezcurra, 2010;Lessmann, 2012). En estudios de casos, la descentralización fiscal ha aumentado las disparidades regionales en China (Kanbur y Zhang, 2005;Qiao et al, 2008), Filipinas (Silva, 2005) y Colombia (Bonet, 2006), al tiempo que ha reducido las disparidades en los EE.UU.…”

“…Esta se puede originar de varias formas en nuestro modelo empírico, lo que puede sesgar el impacto estimado de nuestras variables explicativas claves. Primero, pudiera ser el caso que en contextos con mayores disparidades regionales existiera una mayor presión por la centralización basada en una visión hacia el fortalecimiento de la capacidad redistributiva del gobierno central, o alternativamente, que una mayor descentralización sea percibida como una contribución hacia la convergencia regional (Lessmann, 2012). Segundo, disparidades regionales significativas pudieran conducir a conflictos redistributivos sobre la distribución territorial de los recursos, lo que podría contrarrestar las políticas orientadas hacia una gobernanza más eficiente a nivel central o subnacional (Kyriacou y Roca, 2013).…”