Costs, Preferences, and Institutions: An Empirical Analysis of the Determinants of Government Decentralization

This paper examines the factors determining vertical government structures. An empirical analysis for a panel of OECD countries indicates that apart from preferences, economies of scale, and other factors, institutions explain cross-national differences in the degree of fiscal decentralization. Accounting for taxing powers of subnational governments, the evidence strongly supports the collusion hypothesis according to which delegation of decision-making concerning the assignment of powers and national legislation to subnational representatives leads to increased tax centralization, as compared to direct participation of the citizens of the subnational entities. On the other hand, direct democracy at the national level is associated with higher centralization. --Determinants of Decentralization,Decision-making Institutions,Decentralization Theorem,Collusion Hypothesis

Centralizing Tendencies in the Public Sector in Germany

This paper investigates the long-term trend and the underlying determinants of public sector centralization in Germany from 1871 until today. The institutional and the quantitative review of the German history provides no conclusive evidence for a continuous process of government centralization as suggested by Popitz' "law", but rather for some distinct developments caused by the effects of wars and regime changes. Accordingly, whereas the role of the central government increased continuously at the expense of the state governments untilWorldWar II, after 1950 the state level regained importance. An empirical analysis for the period 1950 to 2001 reveals a signidicant decentralizing effect of per capita income growth, but provides no clear evidence for a causal relationship between economic and European integration and fiscal decentralization in the case of Germany. --Public Sector Centralization,Popitz' Law,Determinants of Centralization,Germany

Public Sector Decentralization: Measurement Concepts and Recent International Trends

This paper deals with the problems encountered in defining and measuring the degree of fiscal decentralization. Drawing on a recent analytical framework of the OECD, different measures of fiscal autonomy and revenue decentralization are presented which consider tax-raising powers of sub-central governments. Taking account of changes in the assignment of decision-making competencies in the course of time, new time series of annual data on the degree of fiscal decentralization are provided for 23 OECD countries in the time period between 1965 and 2001. It is shown that common measures usually employed tend to considerably overestimate the extent of fiscal decentralization. Evidence is also provided for increasing fiscal decentralization in a majority of OECD countries during the last three decades. --Fiscal Decentralization,Measurement of Decentralization,Sub-national Autonomy,Tax Autonomy

Economic Integration and Fiscal Decentralization: Evidence from OECD Countries

Drawing on recent work on the creation and breakup of countries, this paper examines the impact of economic and political integration on the vertical government structure. It argues that by increasing the market size and the benefits from the decentralized provision of public goods, integration might have triggered the recent process of fiscal decentralization in OECD countries. Based on a theoretical framework, the empirical panel analysis relates the degree of public sector decentralization to economic and European integration, controlling for inter-regional heterogeneity, economies of scale, and institutions. The results found mostly support a decentralizing effect of economic and European integration, particularly in the context of preference heterogeneity, whereas participation of sub-national governments in central decision-making is associated with increasing centralization. --Fiscal Decentralization,Economic Integration,European Union,?Sandwich? Hypothesis

Economic Integration and Fiscal Decentralization: Evidence from OECD Countries

Drawing on recent work on the creation and breakup of countries, this paper examines the impact of economic and political integration on the vertical government structure. It argues that by increasing the market size and the benefits from the decentralized provision of public goods, integration might have triggered the recent process of fiscal decentralization in OECD countries. Based on a theoretical framework, the empirical panel analysis relates the degree of public sector decentralization to economic and European integration, controlling for inter-regional heterogeneity, economies of scale, and institutions. The results found mostly support a decentralizing effect of economic and European integration, particularly in the context of preference heterogeneity, whereas participation of sub-national governments in central decision-making is associated with increasing centralization

Public Sector Decentralization: Measurement Concepts and Recent International Trends

This paper deals with the problems encountered in defining and measuring the degree of fiscal decentralization. Drawing on a recent analytical framework of the OECD, different measures of fiscal autonomy and revenue decentralization are presented which consider tax-raising powers of sub-central governments. Taking account of changes in the assignment of decision-making competencies in the course of time, new time series of annual data on the degree of fiscal decentralization are provided for 23 OECD countries in the time period between 1965 and 2001. It is shown that common measures usually employed tend to considerably overestimate the extent of fiscal decentralization. Evidence is also provided for increasing fiscal decentralization in a majority of OECD countries during the last three decades

Centralizing Tendencies in the Public Sector in Germany

This paper investigates the long-term trend and the underlying determinants of public sector centralization in Germany from 1871 until today. The institutional and the quantitative review of the German history provides no conclusive evidence for a continuous process of government centralization as suggested by Popitz' "law", but rather for some distinct developments caused by the effects of wars and regime changes. Accordingly, whereas the role of the central government increased continuously at the expense of the state governments untilWorldWar II, after 1950 the state level regained importance. An empirical analysis for the period 1950 to 2001 reveals a significant decentralizing effect of per capita income growth, but provides no clear evidence for a causal relationship between economic and European integration and fiscal decentralization in the case of Germany

Costs, Preferences, and Institutions: An Empirical Analysis of the Determinants of Government Decentralization

This paper examines the factors determining vertical government structures. An empirical analysis for a panel of OECD countries indicates that apart from preferences, economies of scale, and other factors, institutions explain cross-national differences in the degree of fiscal decentralization. Accounting for taxing powers of subnational governments, the evidence strongly supports the collusion hypothesis according to which delegation of decision-making concerning the assignment of powers and national legislation to subnational representatives leads to increased tax centralization, as compared to direct participation of the citizens of the subnational entities. On the other hand, direct democracy at the national level is associated with higher centralization

Agglomeration, Population Size, and the Cost of Providing Public Services: An Empirical Analysis for German States

This paper is concerned with the question as to what extent population size and density affect the cost of providing public services at the subnational level. Empirical estimates of cost functions are obtained from an analysis of the expenditures of German states disaggregated into about 40 functions of government. The empirical results indicate that generally there is no significant relationship between population density and the cost of public goods. At the same time, cost are almost proportionately related to population size indicating that goods and services provided by the German states display only a limited degree of publicness. --agglomeration,cost of public services,local public goods

Public Sector Centralization and Productivity Growth: Reviewing the German Experience

The paper examines the role of the vertical structure of the public sector for economic growth in Germany in a long?term perspective. A theoretical model shows that, due to spillover effects of public service provision across lower level governments, federal government activities could have substantially contributed to productivity growth. A review of the German experience starting in the last quarter of the 19th century shows that the overall development is consistent with a stimulating role of the federal government in general and in specific areas like, for instance, transport and communication. However, a further empirical analysis of the period after World War II raises doubts about the efficiency of the vertical structure of the public sector with regard to productivity growth, since the results indicate that a smaller budget share of the state level would have benefited growth. --Public sector centralization,public inputs,economic growth,fiscal federalism