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ABSTRACT
Regional inequalities, fiscal decentralization and government quality. Regional Studies. There are theoretical arguments supporting the view that regional income inequalities, the degree of fiscal decentralization and the quality of government are simultaneously determined. This article argues that existing empirical work has failed to deal adequately with this possibility. In light of this, it applies a simultaneous equation model, which accounts for the joint determination of these three variables, to a panel of 23 Organisation for Economic Co-operation and Development (OECD) countries. The empirical evidence that emerges from the analysis suggests that a process of fiscal decentralization, accompanied by measures to improve the quality of government, would be an effective strategy for reducing regional inequalities.
摘要
区域不均，财政分权和政府素质。区域研究。 有理论主张支持以下的观点：区域所得不均、财政分权的程度，以及政府素质，是同时被决定的。本文则主张，既有的经验研究无法充分应对此一可能性。于此，本文将说明这三大变项之共同决策的共时方程模型，运用至二十三个经济合作与发展组织（OECD）国家的面板中。从分析中浮现的经验证据显示，财政分权的过程，连同促进政府素质的措施，可以是减少区域不均的有效策略。
RÉSUMÉ
Les inégalités régionales, la décentralisation budgétaire et la qualité du gouvernement. Regional Studies. Il existe des arguments théoriques qui soutiennent le point de vue selon lequel les inégalités de revenus régionales, le degré de décentralisation budgétaire et la qualité du gouvernment sont simultanément déterminés. Ce présent article affirme que la recherche empirique actuelle n'a pas réussi à faire suffisamment face à cette possibilité. À la lumière de ce constat, on applique un modèle à équations simultanées, qui explique la détermination commune de ces trois variables, à un panel de 23 pays-membres de l'Organisation pour la Coopération et le Développement Économique (OCDE). Les résultats empiriques qui se dégagent de cette analyse laissent supposer qu'un processus de décentralisation budgétaire, conjointement avec des mesures destinées à améliorer la qualité du gouvernement, constituerait une stratégie efficace pour réduire les inégalités régionales.
ZUSAMMENFASSUNG
Regionales Ungleichgewicht, fiskale Dezentralisierung und Regierungsqualität. Regional Studies. Für die Meinung, dass das regionale Einkommensungleichgewicht, das Ausmaß der fiskalen Dezentralisierung und die Qualität der Regierung gleichzeitig bestimmt werden, gibt es theoretische Argumente. In diesem Artikel wird argumentiert, dass diese Möglichkeit in den bisherigen empirischen Arbeiten nicht angemessen untersucht wurde. Vor diesem Hintergrund wird ein simultanes Gleichungsmodell, das die gemeinsame Bestimmung dieser drei Variablen berücksichtigt, auf ein Panel von 23 Staaten der Organisation für wirtschaftliche Zusammenarbeit und Entwicklung (OECD) angewandt. Aus den empirischen Ergebnissen der Analyse geht hervor, dass ein Prozess der fiskalen Dezentralisierung, begleitet von Maßnahmen zur Verbesserung der Regierungsqualität, eine wirksame Strategie zur Verringerung des regionalen Ungleichgewichts darstellen würde.
RESUMEN
Desigualdades regionales, descentralización fiscal y calidad de gobierno. Regional Studies. Hay argumentos teóricos que apoyan la idea de que las desigualdades de renta regionales, el grado de descentralización fiscal y la calidad de gobierno se determinan simultáneamente. En este artículo se sostiene que el trabajo empírico existente no ha tratado de manera adecuada esta posibilidad. En vista de ello, se aplica un modelo de ecuaciones simultáneas que considera la determinación conjunta de estas tres variables, a un panel de 23 países de la Organización para la Cooperación y el Desarrollo Económico (OCDE). La evidencia empírica que emerge del análisis sugiere que un proceso de descentralización fiscal, acompañado de medidas destinadas a la mejora de la calidad de gobierno, sería una estrategia eficaz para la reducción de las desigualdades regionales.
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DISCLOSURE STATEMENT
No potential conflict of interest was reported by the authors.
SUPPLEMENTAL DATA
Supplemental data for this article can be accessed at http://10.1080/00343404.2016.1150992
Notes
1. For an analogous critique of the use of legal origins as instruments in growth regressions, see Bazzi and Clemens (Citation2013).
2. Most studies considering the determinants of fiscal decentralization have ignored the role of both regional inequalities and government quality (e.g., Panizza, Citation1999; Arzaghi & Henderson, Citation2005). Moreover, of the four studies cited in Table A1 that have considered the impact of inequalities on fiscal decentralization, Sacchi and Salotti (Citation2014b) do control for a group of political and institutional variables including one they label pluralism which takes higher values for effective legislatures, competitive nominating processes and party legitimacy. These variables, however, are more likely to capture the level of democracy in a country than its quality of governance as measured in this article (see the next section).
3. A better measure of fiscal decentralization would, moreover, take into account whether sub-central governments determine the tax rate and/or base. Just such a measure has been proposed by Stegarescu (Citation2005), unfortunately its use would reduce the sample by almost 40%. On the other hand, the simple correlation between it and the measure employed in the article for the available countries and years is 0.91, indicating that both indicators are, in practice, very similar.
4. The internal consistency of the underlying data is tested by way of Cronbach's alpha coefficient. In the sample, this ranges from 0.8 to 0.86 (using annual data and four-year averages respectively) and as such exceeds all accepted reliability thresholds (e.g., Charron Lapuente, & Rothstein, Citation2013).
5. One potentially important omitted variable is GDP per capita, the likely confounding influence of which is explained in the empirical method section. Figure A2 in the supplemental data online again plots the three key variables against each other, but now controlling for GDP per capita. The associations between government quality, on the one hand, and regional disparities and fiscal decentralization, on the other, are weaker but still present, while that between fiscal decentralization and regional inequalities seems to disappear.
6. See Wooldridge (Citation2010) for a good explanation of these SIV methods; and Greene (Citation2012), Kmenta (Citation1997), and Zellner and Theil (Citation1962) on system estimation methodology. Avery (Citation1977) and Baltagi (Citation1981, Citation2008) discuss the applications of these methodologies to panel data models.
7. For the theoretical and applied aspects of GMM, see, for example, Matyas (Citation1999), Cameron and Trivedi (Citation2005, Citation2010), and Wooldridge (Citation2010). For details on GMM-3SLS, see Hayashi (Citation2000, ch. 4). Popular econometrics references of GMM-HAC estimator include Newey and West (Citation1987) and Andrews (Citation1991).
8. In fact, lagged values as instruments are used for the following control variables: GDP per capita, country openness, private investment and inequality. All the control variables employed are fully discussed below.
9. For the identification of equation systems, see Greene (Citation2012), Bjorn and Krishnakumar (Citation2008), or Theil (Citation1971).
10. For the results obtained using 3SLS with country fixed effects, see Table A7 in the supplemental data online. All the other results mentioned in the text, but not reported, are, of course, available from the authors upon request.