Local Decentralization and the Quality of Public Services in Europe
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Most work studying the impact of fiscal decentralization on the provision of public services has measured the latter by way of quantitative output indicators (for example, years of schooling or mortality rates) and the former based on aggregate decentralization indicators reflecting sub-central government spending or revenue as a percentage of total spending or revenue. In this article, we reconsider the link between fiscal decentralization and public service provision based on perception-based measures of the quality of public services as well as decentralization measures that disaggregate spending according to expenditure functions. Specifically, we examine the impact of decentralizing spending in the areas of education, health and social protection down to local (municipal) governments, on perceptions concerning the quality of public services, across a panel of 30 European countries over the period 1996–2015. We find that decentralizing education and social protection spending improves the perceived quality of public services while decentralizing health expenditure undermines quality. Our empirical results are robust to the introduction of a range of potentially important covariates including measures that reflect on the degree of autonomy enjoyed by local authorities.
KeywordsFiscal decentralization Public service provision Government effectiveness Education Health Social protection
JEL ClassificationH11 H72 H75
We acknowledge financial assistance from the Institut d’Estudis de l’Autogovern (Generalitat de Catalunya) and ECO2016-75623-R (Ministerio de Economía y Competitividad). Any errors or omissions are, of course, entirely ours.
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