Impact of Fiscal Decentralizations on Education and Healthcare Outcomes: Empirical Evidence from Pakistan

Abstract

This paper aims at investigating the impact of fiscal decentralization on two key social services: education and healthcare outcomes. We use both a simple time series data set and panel data set covering four provinces of Pakistan over the period from 1975 to 2009 to empirically test the impact of fiscal decentralization on infant mortality rate, crude death rate and literacy rate. Besides Ordinary Least Square method we use Generalized Method of Moment econometric technique to obtain robust and consistent results. The empirical findings of this paper indicate that fiscal decentralization is effective in enhancing the delivery and augmenting the quality of education and healthcare services. These findings are important because they suggest, contrary to the traditional public finance theory, that provincial governments can play a far better role in improving the social services delivery like basic education and healthcare compare to federal government.