Four essays on the causes and effects of fiscal decentralisation.
This thesis hinges upon the acknowledgement that Fiscal Decentralisation (FD) is an
important ingredient in the current modernisation of government in numerous
countries. Two basic questions are addressed. Firstly, it examines why some countries
are more fiscally decentralised than others and secondly, it analyses the likely effects
that such a decentralisation might have on the efficiency of the State.
Two complementary approaches are followed to address the first question. Firstly, an
econometric model to explain FD is estimated in Chapter I. The General Government
appears to respond positively to income, population density, grants, military
expenditures and trade. While urbanisation shows a negative effect, no significant
impact on FD was detected in the cases of ethnic diversity and income distribution. As
for decentralisation in the provision of housing and health, income has a negative
effect. Also housing is negatively related to population density and positively affected
by urbanisation. Secondly, the cases of USA, Canada, UK, Spain, Hungary, Poland,
Argentina, Mexico and Chile are put under close examination in two basic aspects.
Chapter II analyses the funding mechanisms of Sub National Governments (SNGs).
Chapter III focuses on those responsibilities being held by SNGs and their historical
origin. Anglo-American and Spanish traditions seem to have had a major influence in
the institutional evolution of some countries and the extent of their FD.
Regarding the effects of FD, Chapter IV examines a range of variables to explain
Government's performance. It uses a two stages procedure that combines Data
Envelopment Analysis with a set of Tobit regressions. The basic conclusion is that FD
does not seem to affect macroeconomic variables, but it does have a positive and
significant effect on the government's provision of health and education.