Fiscal Decentralization: A Review of Theories, Evidence, And Policy Implications
papers.ssrn.com
When governments hand power to local authorities, who really benefits? This review unpacks the competing theories behind fiscal decentralization and what the evidence actually says about its policy impact.
Fiscal FederalismTiebout ModelPrincipal-Agent ProblemPublic Choice Theory
Theory Briefing
- Fiscal decentralization transfers taxing and spending authority to lower government tiers, testing whether local actors allocate resources more efficiently.
- The review systematically examines competing theories — from Tiebout's 'voting with your feet' model to principal-agent problems between central and local governments.
- Policy implications hinge on whether decentralization improves public service delivery or simply shifts accountability gaps further from citizens.