Debt can be rewarding in cases of moderate use, but can be disastrous in cases of imprudence. Excessive debt has been a key challenge to Kenyan local authorities, constraining service delivery and undermining financial sustainability. The Government established and decentralized the Local...

The 1991 Local Government Code devolved substantial spending, taxing, and borrowing powers to local government units (LGUs). Moving governance closer to the people can generate a welfare gain, but local governments must have adequate revenues to finance local development. The paper examines the...

This paper's goal is to increase the understanding of the income and fiscal inequality trends in rural China. Using a comprehensive county-level panel dataset between 1993 and 2002, we describe the dynamic changes in national, regional and provincial inequality measures for income, fiscal...

Based on a theoretical model where state limits on local government policy elicit a move from private value (position issue) to common value (valence issue) voting, I exploit exogenous variation in tax limitation rules in over 7,000 Italian municipalities during the 2000s to show that fiscal...

A `dress-up contest' is a competition for the best public image, and fiscal decentralisation can lead to such contests between local governments. In this paper we model the dress-up contest and investigate how it a effects social welfare. We show that yardstick competition (due to fiscal...

This paper analyzes the welfare implications of a transfer mechanism in a fiscally decentralized economy where local governments select their tax collection effort to maximize their lifetime utility. We consider a transfer rule that both punishes for the lack of efficiency in tax-collection and...

Government spending on health has grown as a percent of GDP over the last 40 years in industrialized countries. Widespread decentralization of healthcare systems has often accompanied this increase in spending. In this paper, we explore the effect of soft budget constraints on subnational health...

This paper explores the role of information transmission and misaligned interests across levels of government in explaining variation in the degree of decentralization across countries. Within a two-sided incomplete information principal-agent framework, it analyzes two alternative...

This paper explores the role of information transmission and misaligned interests across levels of government in explaining variation in the degree of decentralization across countries. Within a two-sided incomplete information principal-agent framework, it analyzes two alternative...

This paper studies the impact of fiscal decentralization on public sector efficiency (PSE). We first use a theoretical framework that illustrates the two opposing forces that shape a non-monotonic effect of fiscal decentralization on PSE. Subsequently, we carry out an empirical analysis for 21...