Can fiscal decentralization alleviate government consumption volatility?
- Autores: Davide Furceri, Agnese Sacchi, Simone Salotti
- Localización: XXI Encuentro Economía Pública, 2014, pág. 87
- Idioma: inglés
- Enlaces
-
Resumen
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 offset volatility by distributing power to sub-central governments, with particular benefits for smaller countries usually more prone to volatility.
