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Fiscal decentralization and public sector efficiency: Evidence from OECD countries

Adam, Antonis and Delis, Manthos D and Kammas, Pantelis (2012): Fiscal decentralization and public sector efficiency: Evidence from OECD countries.

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Abstract

This paper empirically examines the relationship between fiscal decentralization and public sector efficiency. A country-level dataset is used to measure public sector efficiency in delivering education and health services and the new indices are regressed on well-established decentralization measures. The analysis is carried out for 21 OECD countries, between 1970 and 2000. Irrespective of whether public sector efficiency concerns education or health services, an inverted U-shaped relationship has been identified between government efficiency in providing these services and fiscal decentralization. This relationship is robust across several different specifications and estimation methods.

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