Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
991394 | World Development | 2013 | 12 Pages |
Abstract
SummaryThis article develops a new empirical approach to analyze the potential link between fiscal decentralization and economic efficiency based on a stochastic frontier model with spatial error correction. Fiscal decentralization is not considered to be a source of growth in itself but an incentive scheme that impacts local governments’ spending as a means to improve investment conditions. Panel data for Zhejiang Province during 1995–2005 indicate that revenue and expenditure decentralization both promoted allocative efficiency. Yet, the impact of fiscal incentives decreases with rising income inequality among county governments.
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Authors
Stefan Brehm,