Does political decentralization affect income inequality? The role of governance quality

This paper examines whether an increase in political decentralization, which is a global trend, affects income inequality. It argues that the effect of decentralization on equality lies with the quality of governance, that is, how well the traditions and institutions of an authority in a country are...

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Published in:Regional studies 2023-05, Vol.57 (5), p.829-843
Main Author: Tselios, Vassilis
Format: Article
Language:English
Subjects:
Decentralization
Equality
Governance
governance quality
Income
Income inequality
political decentralization
private investments
Socioeconomics
Traditions
world
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description This paper examines whether an increase in political decentralization, which is a global trend, affects income inequality. It argues that the effect of decentralization on equality lies with the quality of governance, that is, how well the traditions and institutions of an authority in a country are exercised. Using an instrumental variables (IV)/two-stage least squares (2SLS) method, this paper shows that an increase in decentralization reduces inequality. However, this reduction is stronger for countries with a relatively low quality of governance, possibly because private investments in these countries reduce income inequality. A policy implication is that institutional-specific decentralization strategies can reduce inequalities.
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source EconLit s plnými texty; EBSCOhost Business Source Ultimate; International Bibliography of the Social Sciences (IBSS); Taylor & Francis; PAIS Index
subjects Decentralization
Equality
Governance
governance quality
Income
Income inequality
political decentralization
private investments
Socioeconomics
Traditions
world
title Does political decentralization affect income inequality? The role of governance quality
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