Quality of government, decentralization and sub-national growth

Kevin Fourrey (Doctorant CREM, Unicaen, UFR SEGGAT)

FOURREY Kevin

Direction de thèse : Isabelle Lebon - Frédéric Chantreuil
Co-auteur/Joint work with : Luiz R. de Melloy and Joaquim de Oliviera Martins
Résumé / abstract:
In OECD countries 72% of public investment is in average managed by the sub-national governments (OECD, 2014). One might think that local governance quality influences returns of public investments, thus it seems appropriate to evaluate the impact of good governance on growth at a subnational level. This article looks at the hypothetical causal impact of good governance on the sub-national GDP growth per capita. Moreover, the study takes into consideration decentralization issues, especially because we might expect that quality of regional government impact on growth depends of sub-national power and competencies. To answer this question we use a multi-level model, with fixed effects and mixed effects depending on the question we treat. Hence, we look at the influence of quality of governance, decentralization and regional authority on regional growth, defined as the log annual growth average of GDP per capita from 2010 to 2013, within 18 European countries. This article gives evidence of a positive impact of quality of governance on regional growth, convex rather than linear, and increasing with tax decentralization and regional authority. Besides, there are some evidence that regional authority has a negative impact on growth, and that the tax decentralization effect depends on how it is measured. Anyway, the regional authority and tax decentralization effects tend to counterbalance each other, in the sense that the negative impact of regional authority decreases, and it may be positive, as tax decentralization indexes increase.