Many industrialized countries have recently implemented fiscal decentralization reforms assigning more competences and spending responsibilities to sub-national governments. In this paper we investigate what leads to the decentralization of different categories of public expenditure in 19 developed countries over the period 1980-2006. Adopting a general-to-specific empirical approach, we estimate different models for each of the spending functions under analysis. Our results confirm existing findings on the negative link between regional income disparities and expenditure decentralization. A similarly negative relationship is found for a set of demographic variables, leading to the conclusion that macroeconomic and, more importantly, political factors are the key to explain the recently increased decentralization levels in most industrialized countries. Finally, we complete our analysis by studying what determines the sub-national expenditure composition, finding that political and demographic changes are the most important factors in shaping the local spending mix.

We study the relationship between discretionary fiscal policy and macroeconomic stability in 21 OECD countries over the 1985-2012 period. The novelties of our contribution lie in the use of annual panel data, whereas most of the existing evidence is cross-sectional, and more importantly in the thorough investigation of how fiscal rules affect the policy-macroeconomic stability relationship. We find that the aggressive use of discretionary fiscal policy, particularly of government consumption items, leads to higher volatility of both output and inflation. However, when strict fiscal rules are introduced, discretionary policy becomes output-stabilising rather than destabilising. This result can be more easily achieved by rules on balanced budgets, rather than on expenditures, revenues, or debt.On the other hand, fiscal rules are unable to affect the inflation-destabilising nature of discretionary policy, probably because of the higher importance of central banks in that respect.

In this paper we investigate the effects of fiscal decentralization on income inequality using a sample of 23 OECD countries over the period 1971-2000. We utilize novel and robust measures of fiscal decentralization based on different degrees of expenditure and tax autonomy of sub-central governments. We also use several different specifications to tackle the potential endogeneity and reverse causality issues. Our results highlight the importance both of the nature of fiscal decentralization -expenditure versus taxation -and of the extent to which responsibility and decision powers are actually assigned to local governments. An important finding is that a higher degree of tax decentralization is associated with higher household income inequality within a country. This suggests that even if fiscal decentralization could be attractive according to efficiency reasons, it may actually have undesirable consequences on the equity side.

The influence of decentralized taxes and intergovernmental grants on local spending volatility. Regional Studies. This paper studies what affects the volatility of sub-central public spending in 20 Organisation for Economic Co-operation and Development (OECD) countries. The evidence based on data from 1972 to 2007 shows that the volatility of intergovernmental grants from upper levels is positively associated with the volatility of local expenditure. On the other hand, the volatility of local tax revenues -mainly that of property taxes -exerts the opposite effect. These findings suggest that making local governments rely more on grants than own tax revenues adversely affects their spending stability. Allowing them to levy autonomously taxes relying on responsive tax bases provides incentives to smooth their expenditure. L'impact de la décentralisation fiscale et de l'octroi des subventions intergouvernementales sur la volatilité des dépenses locales. Regional Studies. Cet article étudie ce qui influe sur la volatilité des dépenses publiques au niveau régional dans 20 pays de l'Organisation de coopération et de développement économique (OCDE). À partir des données pour la période allant de 1972 jusqu'à 2007, les résultats laissent voir une corrélation positive entre la volatilité des subventions intergouvernementales provenant des niveaux supérieurs d'administration avec la volatilité des dépenses locales. De l'autre côté, la volatilité des recettes fiscales locales -principalement les impôts fonciers -produit l'effet contraire. Ces résultats laissent supposer que la dépendance des administrations locales des subventions plutôt que des recettes fiscales propres a un effet négatif sur la stabilité de leurs dépenses. Leur permettre de prélever de façon autonome des impôts qui reposent sur des assiettes fiscales adaptables fournit des incitations au lissage de leurs dépenses. MOTS-CLÉS RESUMENLa influencia de los impuestos descentralizados y las subvenciones intergubernamentales en la volatilidad del gasto local. Regional Studies. En este artículo estudiamos qué factores influyen en la volatilidad del gasto público subcentral en 20 países de la Organización para la Cooperación y el Desarrollo Económico (OCDE). Según los resultados de datos de 1972 a 2007, la volatilidad de las subvenciones intergubernamentales de niveles superiores está positivamente asociada a la volatilidad del gasto local. Por otra parte, la volatilidad de los ingresos fiscales locales -principalmente de impuestos inmobiliarios-ejerce el efecto contrario. Estos resultados indican que si los Gobiernos locales confíen más en las subvenciones que en sus propios ingresos fiscales se produce un efecto negativo en la estabilidad de sus gastos. Si se permite que recauden impuestos autónomamente y cuenten con bases impositivas receptivas se crean incentivos para amortiguar sus gastos. PALABRAS CLAVESvolatilidad del gasto local; ingresos locales; impuestos inmobiliarios; subvenciones intergubernamentales JEL E62, H71, H77, R50 HISTORY

Using a spatial general equilibrium model, this paper investigates the resilience of European Union regions under three alternative recessionary shocks, each activating different economic adjustments and mechanisms. We measure the vulnerability, resistance and recoverability of regions and identify key regional features affecting the ability of regions to withstand and recover from unexpected external shocks. The analysis reveals that the responses of regions vary according to the nature of the external disturbance and to the pre-shock regional characteristics. Finally, it seems that resilience also depends on factor mobility. The analysis, although designed before the onset of the Covid-19 pandemic, offers interesting insights into how to use a general equilibrium framework to study resilience in such a context.

In this paper we evaluate empirically the impact of fiscal policy on two key determinants\ud of long-term growth, i.e., private investment and productivity growth. We mostly focus on a\ud panel of 20 OECD economies from 1970 to 2009, although we also present some estimates based\ud on data for 80 developing economies. Our findings suggest that high public debt adversely\ud affects both aggregate investment spending and productivity growth, through distortions related\ud to the size of the public sector. We also find weak evidence of some nonlinear effects on\ud productivity, with government debt becoming more detrimental when above 85-90% of GDP\ud in advanded economies

The aim of this paper is to analyse the infiuence of regional economic disparities on the fiscal decentralisation processes in twenty-one OECD countries over the period 1981 to 2005. We use novel and robust measures of fiscal decentralisation based on different degrees of autonomy over both expenditures and taxes granted to subcentral governments. Our results show that high regional economic disparities call for lower fiscal decentralisation. This could be interpreted as the outcome of a bargaining process driven by the relative strength and different incentives of rich and poor regions. Moreover, the extent to which responsibility and decision powers are really left to subcentral governments appears to be crucial. Thus, from a positive point of view, equity considerations seem to suggest avoidance of fiscal decentralisation processes in countries with significant regional economic disparities, notwithstanding the well-known efficiency gains.

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