Does Decentralization Matter For Regional Disparities? A Cross-Country Analysis
This paper looks at the relationship between fiscal and political decentralization and the evolution of regional inequalities in a panel of 26 countries - 19 developed and 7 developing - for the period between 1990 and 2006. Using an instrumental variables method, it finds that whereas for the whole sample decentralization is completely dissociated for the evolution of regional disparities, the results are highly contingent on the level of development, the existing level of territorial inequalities, and the fiscal redistributive capacity of the countries in the sample. Decentralization in high income countries has, if anything, been associated with a reduction of regional inequality.