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.