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Cover of: Decentralization and Local Governments' Performance: How Does Fiscal Autonomy Affect Spending Efficiency?
Gilberto Turati, Lorenzo Boetti, Massimiliano Piacenza

Decentralization and Local Governments' Performance: How Does Fiscal Autonomy Affect Spending Efficiency?

Section: Articles
Volume 68 (2012) / Issue 3, pp. 269-302 (34)
Published 09.07.2018
DOI 10.1628/001522112X653840
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Summary
All over the world, recent legislative reforms share the goal of increasing fiscal autonomy of lower tiers of governments. The aim of this policy is to reduce vertical fiscal imbalance (VFI) and enhance the efficiency in the provision of public services, via increased accountability of local politicians. The purpose of this paper is to assess whether inefficiency of local governments is really affected by the degree of VFI, relying on a sample of Italian municipalities to study the determinants of spending performance. Consistently with modern fiscal federalism theories, our results show that more fiscally autonomous municipalities exhibit less inefficient behavior, thus supporting the waves of reforms towards the devolution of taxing power to lower government tiers.