2009 volume 41(10) pages 2455 – 2473
doi:10.1068/a41296

Cite as:
Lessmann C, 2009, "Fiscal decentralization and regional disparity: evidence from cross-section and panel data" Environment and Planning A 41(10) 2455 – 2473
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Fiscal decentralization and regional disparity: evidence from cross-section and panel data

Christian Lessmann

Received 29 September 2008; in revised form 2 December 2008; published online 6 August 2009

Abstract. The advantages and disadvantages of public sector decentralization are widely discussed in economics and political science. Some authors argue that decentralization leads to an optimal provision of public services and promotes economic growth, while others emphasize the dangers of competition between subnational governments, especially those associated with interregional redistribution. Using cross-section and panel data for twenty-three OECD countries, from 1982 to 2000, this paper empirically studies the impact of fiscal decentralization on regional disparities. It is found that a higher degree of decentralization is associated with lower regional disparities. Hence, poor regions experience no disadvantages from decentralization and, instead, appear to benefit.

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