Decentralization and the Welfare State: What Do Citizens Perceive?

Abstract

Trust in public institutions and public policies are generally perceived as a precondition for economic recovery in times of recession. Recent empirical evidence tends to find a positive link between decentralization and trust. But our knowledge about whether decentralization -through increased trustimproves the perception of the delivery and effectiveness of public policies is still limited. In this paper we estimate the impact of fiscal and political decentralization on the perception of the state of the education system and of health services, by using the 2002, 2004, 2006 and 2008 waves of the European social survey. The analysis of the views of 160,000 individuals in 31 European countries indicates that while the effect of fiscal decentralization on the perception of the state of the health and education system is unambiguously positive, political decentralization affects citizen's satisfaction with education and health delivery in different ways. The influence of political decentralization, however, is highly contingent on whether we consider the capacity of the local or regional government to exercise authority over its citizens (self-rule) or to influence policy at the national level (shared-rule).

Is Decentralization Really Welfare Enhancing? Empirical Evidence from Survey Data (1994‐2011)

“…However, the benefits of decentralization crucially depend on the population size of the region , while we do not find empirical evidence in favor of a positive impact of tax revenue decentralization . Note our results are in accordance with those obtained by Díaz‐Serrano and Rodríguez‐Pose () in favor of the efficiency gains due to the decentralization of education and health, in their case, using a cross‐country sample of European countries.…”

“…We also include regional decentralization 29 . Note our results are in accordance with those obtained by Díaz-Serrano and Rodríguez-Pose (2015) in favor of the efficiency gains due to the decentralization of education and health, in their case, using a crosscountry sample of European countries.…”

“…Probably, the closest empirical paper to ours is Díaz-Serrano and Rodríguez-Pose (2015). They estimate to what extent citizens are satisfied with public provision of Education and Health across 31 European countries using the 2002,2004,2006 and 2008 waves of the European Social Survey (ESS).…”

“…The empirical literature, which is reviewed in detail in the next section, has adopted a range of different approaches when testing for the presence of welfare gains under decentralization and, in almost all instances, the empirical evidence is favorable to decentralized institutional arrangements. Some papers have focused on whether the outcomes of certain public policies (or indeed general subjective well-being) improve when provision is decentralized (Hoxby, 2000;Treisman, 2002;Cantarero and Pascual, 2008;Bjørnskov, Dreher and Fischer, 2008;Kyriacou and Roca-Sagalés, 2011;Díaz-Serrano and Rodríguez-Pose, 2012;Falch and Fischer, 2012;or Caldeira, Foucault, Rota-Graziosi, 2012 and2015); others on whether decentralized public policies are more responsive to expenditure needs (Faguet, 2004;Esteller-Moré and Solé-Ollé, 2005;Borge, Brueckner and Rattsø, 2014); others have examined whether politicians have better knowledge about voter preferences in small jurisdictions (Dahlberg, Mörk and Ågren, 2005); while a final strand of the empirical literature has turned its attention to the question of whether public expenditure composition varies as a consequence of decentralization (González-Alegre, 2010; Arze del Granado, Martínez-Vazquez and McNab, 2012;and again, Borge, Brueckner and Rattsø, 2014). The approach followed by most of these papers is general enough to accommodate welfare gains due to greater levels of allocative efficiency and of productive efficiency.…”

The Economics of Small States; Observations from Scotland - a Comment

“…The production relationships and consumption patterns that characterise today's interconnected global economy mean that sub-national regions or cities are more natural units within which to analyse socioeconomic development and the policies to promote it. Indeed, in Europe and elsewhere the globalization of the last twenty years has been associated with considerable devolution of policy-making powers from national to sub-national levels in search of an 'economic dividend' and/or the closing of a 'democratic deficit' (Morgan, 2002;Diaz-Serrano and Rodríguez-Pose, 2015). A result is that the powers once typically associated with the nation state are now distributed in different ways in different places, and increasingly are also exercised in new ways that reflect more porous boundaries between public and private sectors.…”