Devolution Dynamics of Spanish Local Government

Abstract

IntroductionThe literature on the economic dividend of devolution (that is, the transfer of powers from higher to lower levels of government), has been growing over the last few years. Many factors have prompted its blooming, among which we may highlight three. First, in the case of developed countries, the guises of subsidiarity, devolution, and federalism have prompted its analysis as a central policy issue both in the United States and in several European Union countries (Inman and Rubinfeld, 1997;1998). Second, in the developing world it is at the center of reform efforts not only throughout Latin America and many parts of Asia and Africa but also in several formerly planned economies (Stewart, 2000). Last, but not least, analyzing the links between decentralization and efficiency has been always at the core of public economics, and provides the rationale as to which benefits could arise from decentralizing in developing countries. As recognized by many studies since Tiebout's classic essay (1956), a literature has developed that emphasizes the benefits of political decentralization and the competition that it fosters among regional or local governments (Cai and Treisman, 2004).The literature analyzing the economic dividend of devolution in local government enumerates several advantages, although some downsides also exist. The early contributions date back to the pioneering studies by Tiebout (1956) and Oates (1972), but, given the acceleration of the global trend towards devolution that has occurred over the last thirty years, some recent studies have reassessed its costs and benefits. (1)

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