Does fiscal decentralizacion Foster Regional investiment in productive infrastructure

Abstract

The aim of this paper is to analyze the effect of revenue decentralization on\nthe provision of infrastructure at the sub-national level. We estimate the effects of revenue\ndecentralization and earmarked grant financing on the level of sub-national infrastructure\ninvestment in 20 European countries over the period 1990-2009. The results are interpreted\nin light of the predictions of the theory on fiscal federalism. We find that it is sub-national\ninfrastructure investment that increases after revenue decentralization and not investment in\nredistribution. However, the effect of revenue decentralization is lower the higher the use of\nearmarked grants to fund infrastructure investment