Skip to main content
Article thumbnail
Location of Repository

The Macroeconomic Impact of Decentralized Spending and Deficits: International Evidence

By Francesca Fornasari, Steven B. Webb and Heng-fu Zou


The main macroeconomic questions about decentralization are whether it has led to an overall expansion of the public sector or to unsustainable fiscal deficits. In the long term, subnational spending contributes to a larger overall government sector, but steady subnational deficits do not affect the average level of central government deficits, according to our economic analysis of 32 industrial and developing countries, 1980-94. Increases of subnational spending and deficits, however, lead to increases in spending and deficits at the national level. The relationships are strong economically as well as significant statistically. We can reject the hypothesis that increases of transfers between central and subnational governments are usually determined exogenously by the center.Decentralization, Public spending, Deficits

OAI identifier:
Download PDF:
Sorry, we are unable to provide the full text but you may find it at the following location(s):
  • (external link)
  • Suggested articles

    To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.