Fiscal Decentralization - a Survey of the Empirical Literature

We survey the empirical literature on fiscal decentralization (FD) and analyze the advantages and disadvantages of shifting fiscal responsibilities to sub national governments. We suggest several conclusions: First, there are large disagreements regarding the influence of FD on the size of government and the effect of FD on tax competition, economic growth and corruption. Probably the only unanimous conclusion is that intergovernmental grants are heavily influenced by political considerations. The empirical literature deals with several additional issues which are related to FD. While the literature on these topics is more scant and is not always econometrically rigorous, it is also more in agreement: there is no evidence for a "race to the bottom" in welfare transfers due to FD; FD seems to increase inequality in developing countries but to decrease inequality in developed economies and there seem to be economies of scale in the provision of several local public services. We conclude that there is no general answer regarding the net effect of FD. Fiscal decentralization reforms have to consider a wide array of factors and local contingencies before a successful implementation could be made

Academic in-group bias in economics

This paper studies academic in-group bias in the top five economics journals. We examine citation counts for articles published in these journals during the years 2006–2015, and compare counts for articles written by in-group members versus out-group members, where in-group status is defined based on whether at least one author shares the journal’s institutional affiliation. Our results suggest that in-group bias exists in the QJE, but not in the JPE or REStud (the AER and Econometrica are the control group). We thus confirm the existence of academic in-group bias in some, but not all, top five economics journals

Revenue decentralization, central oversight and the political budget cycle : evidence from Israel

This paper examines whether revenue decentralization and direct external financial supervision affect the incidence and strength of political budget cycles, using a panel of Israeli municipalities during the period 1999-2009. We find that high dependence on central government transfers—as reflected in a low share of locally raised revenues in the municipality’s budget—exacerbates political budget cycles, while tight monitoring—exercised through central government appointment of external accountants to debt accumulating municipalities—eliminates them. These results suggest that political budget cycles can result from fiscal institutions that create soft budget constraints: that is, where incumbents and rational voters can expect that the costs of pre-election expansions will be partly covered later by the central government

Revenue decentralization, central oversight and the political budget cycle : evidence from Israel

This paper examines whether revenue decentralization and direct external financial supervision affect the incidence and strength of political budget cycles, using a panel of Israeli municipalities during the period 1999-2009. We find that high dependence on central government transfers—as reflected in a low share of locally raised revenues in the municipality’s budget—exacerbates political budget cycles, while tight monitoring—exercised through central government appointment of external accountants to debt accumulating municipalities—eliminates them. These results suggest that political budget cycles can result from fiscal institutions that create soft budget constraints: that is, where incumbents and rational voters can expect that the costs of pre-election expansions will be partly covered later by the central government