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Using a panel of international student test scores, 1980 - 2000, panel fixed effects estimates suggest that government spending decentralization is conducive to student performance. The effect does not appear to be mediated through levels of, or decentralization in, educational spending. In political economy and public finance, the linkage between decentralization and the quality in the provision of public sector services has been much debated. However, empirical evidence is limited because, in general, the quality of public sector services is hard to measure, and decentralization mainly varies across countries.
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