KTH/CESIS Working Paper Series in Economics and Institutions of Innovation
Does fiscal decentralization foster regional investment in productive infrastructure?
(), Albert Solé-Ollé
(), Andreas Stephan
() and Timo Välilä
Abstract: The aim of this paper is to analyze the effect of revenue
decentralization on the provision of infrastructure at the sub-national
level. We estimate the effects of revenue decentralization and earmarked
grant financing on the level of sub-national infrastructure investment in
20 European countries over the period 1990-2009. The results are
interpreted in light of the predictions of the theory on fiscal federalism.
We find that it is sub-national infrastructure investment that increases
after revenue decentralization and not investment in redistribution.
However, the effect of revenue decentralization is lower the higher the use
of earmarked grants to fund infrastructure investment.
Keywords: Regional investment; fiscal federalism; dynamic panel data; (follow links to similar papers)
JEL-Codes: C23; H54; H76; H77; (follow links to similar papers)
31 pages, April 12, 2012
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