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Federalism and Decentralization – A Critical Survey of Frequently Used Indicators
The economic effects of federalism are unclear: some papers find that federalism has strong positive effects on a number of economically relevant variables, others find negative effects. The results often crucially hinge upon the proxies for federalism used. In this paper, we critically survey th...
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| Published in: | MAGKS - Joint Discussion Paper Series in Economics (Band 21-2008) |
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| Main Authors: | , |
| Format: | Work |
| Language: | English |
| Published: |
2008
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| Subjects: | |
| Online Access: | PDF Full Text |
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| Summary: | The economic effects of federalism are unclear: some papers find that
federalism has strong positive effects on a number of economically relevant
variables, others find negative effects. The results often crucially hinge
upon the proxies for federalism used. In this paper, we critically survey the
existing indicators for both federalism and fiscal decentralization. We
argue that federalism is a constitutional institution whereas
decentralization is (the outcome of) a policy choice and that the two ought
to be systematically distinguished because decentralization can also occur
in non-federally structured states. We further argue that institutional
details are very important with regard to federalism and that dummy
variables usually capture only very specific aspects of the institutional
details. We use factor analysis to test whether the latent variables behind
the observed indicators support these assumptions. It is shown that more
than two important factors result, implying that a more fine-grained
differentiation beyond the distinction between federalism and
decentralization might be in order. The correlations of the most important
proxies for various aspects of federalism and decentralization with a
number of (quasi-) exogenous variables as well as with institutional
variables are usually rather modest. |
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| ISSN: | 1867-3678 |
| DOI: | 10.17192/es2023.0208 |