The purpose of this paper is to assess whether expenditure decentralization has contributed to weakening fiscal performance in Europe. Using a panel of EU15 countries for the period 1995-2011, we estimate three econometric models and ask the following questions: (1) does the form of spending...

This paper discusses how decentralized countries can achieve sound fiscal relations between the central government and lower government levels. The concepts of 'vertical gap' and 'vertical balance' provide an analytical framework for identifying and addressing key challenges. These concepts can...

This paper argues that corruption patterns are endogenous to political structures. Thus, corruption can be systemic and planned rather than decentralized and coincidental. In an economic system without law or property rights, a kleptocratic state may arise as a predatory hierarchy from a state...

Already in precarious shape, the financial health of India's states took a turn for the worse in the late 1990s when state deficits and debt rose sharply. While India is among the world's most decentralized economies, greater decentralization is not the root cause of this situation. Panel...

Using a novel municipality-level panel dataset, this paper investigates the empiricalcharacteristics of vertical fiscal imbalances (VFIs) in Moldova over the period 2005–13. Theresults show that the extent of variation in VFIs across 898 municipalities can be explained bythe level of per...

Does fiscal decentralization improve health and educational outcomes? Does this improvement depend on the quality of governance? How do fiscal decentralization and governance interact? We answer these questions through an instrumental variable Tobit analysis of cross-country panel data. We find...

Financial crises are traditionally analyzed as purely economic phenomena. The political economy of financial booms and busts remains both under-emphasized and limited to isolated episodes. This paper examines the political economy of financial policy during ten of the most infamous financial...

Electoral rules determine how voters' preferences are aggregated and translated into political representation, and their design can lead to the election of representatives who represent broader or narrower constituencies. Relying on a regression discontinuity design, I contrast single- and...

Unanticipated changes in tax policy are likely to have different macroeconomic effects compared to anticipated changes due to several mechanisms, including fiscal foresight and policy uncertainty. It is therefore important to understand what drives such policy surprises. We explore the nature of...

We examine electoral cycles in tax reforms using monthly data over the period of 1990-2018 for 22 advanced economies and emerging markets. We show that governments tend to avoid announcing tax reforms during the months running up to elections. In addition, they become more likely to announce...