The purpose of this paper is to investigate empirically the extent and evolution of fiscal (de)centralization in a sample of OECD countries. We ask whether and how some factors derived by the economic theory on this issue are empirically significant either for centralization or decentralization. Then, building a new panel data set, we test the significance of these factors using a random effects model. Our results seem to confirm that land area, population, degree of urbanization and income per capita are negatively correlated with centralization. Moreover, we find that heterogeneity in ethno-linguistic groups is significantly related to the observed decentralization in the patterns of expenditure on education and on religious, cultural and recreational services. © 2003 Society for Policy Modeling. Published by Elsevier Inc. All rights reserved.
- Fiscal federalism
- Random effects model