Logo
Munich Personal RePEc Archive

Can fiscal decentralization alleviate government consumption volatility?

Furceri, Davide and Sacchi, Agnese and Salotti, Simone (2014): Can fiscal decentralization alleviate government consumption volatility?

This is the latest version of this item.

[thumbnail of MPRA_paper_54683.pdf]
Preview
PDF
MPRA_paper_54683.pdf

Download (710kB) | Preview

Abstract

We analyse how fiscal decentralization affects the volatility of government consumption extending the existing literature that mainly deals with the effects of the former on government size. Using data for 97 developed and developing countries from 1971 to 2010, we find 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.

Available Versions of this Item

Atom RSS 1.0 RSS 2.0

Contact us: mpra@ub.uni-muenchen.de

This repository has been built using EPrints software.

MPRA is a RePEc service hosted by Logo of the University Library LMU Munich.