This paper assesses the effect of fiscal decentralization on government consumption volatility using data for 97 developed and developing countries from 1971 to 2010. The results suggest that a higher degree of fiscal decentralization leads to lower government consumption volatility. This result holds for the sub-sample of advanced economies, while it is not confirmed for those less-developed. This mechanism seems to work mainly through a lower volatility of the non-discretionary spending, which typically belongs to the central government’s policy. We also confirm existing findings according to which country size lowers government spending volatility. Thus, given a minimum level of development, fiscal decentralization reforms can reduce spending volatility by distributing power to sub-central governments, particularly in smaller countries which are usually more prone to volatility.

Furceri, D., Sacchi, A., & Salotti, S. (2016). Can Fiscal Decentralization Alleviate Government Consumption Volatility?. OPEN ECONOMIES REVIEW, 27(4), 611-636 [10.1007/s11079-016-9392-1].

Can Fiscal Decentralization Alleviate Government Consumption Volatility?

FURCERI, Davide
;
2016

Abstract

This paper assesses the effect of fiscal decentralization on government consumption volatility using data for 97 developed and developing countries from 1971 to 2010. The results suggest that a higher degree of fiscal decentralization leads to lower government consumption volatility. This result holds for the sub-sample of advanced economies, while it is not confirmed for those less-developed. This mechanism seems to work mainly through a lower volatility of the non-discretionary spending, which typically belongs to the central government’s policy. We also confirm existing findings according to which country size lowers government spending volatility. Thus, given a minimum level of development, fiscal decentralization reforms can reduce spending volatility by distributing power to sub-central governments, particularly in smaller countries which are usually more prone to volatility.
Furceri, D., Sacchi, A., & Salotti, S. (2016). Can Fiscal Decentralization Alleviate Government Consumption Volatility?. OPEN ECONOMIES REVIEW, 27(4), 611-636 [10.1007/s11079-016-9392-1].
File in questo prodotto:
File Dimensione Formato  
OER decentralization 2016.pdf

Solo gestori archvio

Dimensione 822.98 kB
Formato Adobe PDF
822.98 kB Adobe PDF   Visualizza/Apri   Richiedi una copia

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/10447/243279
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 2
  • ???jsp.display-item.citation.isi??? 2
social impact