Fiscal decentralization and income inequity-cross section analysis of Central and Southeastern European countries
Fiscal decentralization and income inequity-cross section analysis of Central and Southeastern European countries

Summary/Abstract: This paper explores the effects of public sector decentralization on income inequality in Central and Southeastern European countries over the last two decades. Although, there are many research papers regarding the benefits of fiscal decentralization, the negative effects of decentralization have not been researched enough so far. In relation to this, with this paper we try to contribute to a better explanation of the potential influence of fiscal decentralization on income redistribution in developing countries. In the second part of the paper, we conduct an empirical research to estimate the direction and significance of the potential effects of decentralization on income inequality in Central and Southeastern European countries. The results from the cross-country analysis, indicate that fiscal decentralization leads to a greater income inequality in the analyzed countries, regardless whether local governments are financed by their own sources of revenues or by fiscal transfers from the central government.

• Details
• Contents