Fiscal decentralization and the poor

In recent years, many governments in developed and developing economies have implemented reforms to decentralize tax raising powers, the supply of public services, and other functions previously delivered by central governments, with the aim of achieving greater government accountability and more efficient and effective public services. In this thesis, I examine empirically the effects of fiscal decentralization on several key areas of public policy, including: poverty and income distribution (chapter 3), public healthcare and public education (chapter 4), and citizen trust in government (chapter 5). In order to examine the effects of fiscal decentralization I produce a fiscal decentralization dataset comprising of a range of indicators for tax and spending decentralization; subnational government autonomy; local government accountability and local government size (land area and population). Using this dataset, I produce the following findings. First, in chapter 3 tax and spending decentralization can help reduce income inequality in high income countries, and increase absolute poverty in low and middle income countries. Furthermore, fiscal decentralization appears to be more beneficial for the poor when the average size of local jurisdictions is smaller. Second, in chapter 4 I find that there is no clear relationship between fiscal decentralization and the level of public healthcare and public education provided. Instead, fiscal decentralization appears to improve vaccination coverage over time, when subnational governments have autonomy over expenditure, and when there is a higher level of public spending on healthcare. Third, in chapter 5 I find that fiscal decentralization has no clear effect on citizen trust in government; however, tax and spending decentralization has contrasting effects depending on the number of tiers of government (government structure) and the average population size of local jurisdictions. The main conclusion is that fiscal decentralization can have an impact on the key areas of public policy examined in my research, however these effects are often not observed through tax and spending decentralization, but rather other aspects of fiscal decentralization, including the closeness of local government to local citizens, local government autonomy and accountability.