Fiscal Decentralization and Corruption Perceptions: A Comparative Analysis of Expenditure, Revenue and Tax Decentralization
DOI:
https://doi.org/10.63556/tisej.2026.1899Keywords:
Fiscal Decentralization, Corruption, Institutional Quality, Public Finance, Panel Data AnalysisAbstract
Fiscal decentralization refers to the allocation of fiscal powers and responsibilities between central and local governments with the aim of improving the efficiency of public service delivery and better addressing local needs. Fiscal decentralization consists of three main dimensions: expenditure decentralization, revenue decentralization, and tax decentralization. Corruption, defined as the abuse of public power for private gain, constitutes a major public governance problem not only at the central government level but also within local governments. This study aims to empirically examine the effects of different dimensions of fiscal decentralization on corruption. For this purpose, a balanced panel dataset covering 43 middle- and high-income countries over the period 2009–2020 was analyzed. The empirical findings indicate that expenditure, revenue, and tax decentralization are all statistically significantly associated with corruption. Moreover, the effects of fiscal decentralization remain statistically significant after controlling for the rule of law. The findings further demonstrate that examining the different dimensions of fiscal decentralization separately provides a more comprehensive understanding of the relationship between fiscal decentralization and corruption. From a policy perspective, the results suggest that achieving the expected benefits of fiscal decentralization requires institutional arrangements that strengthen the rule of law, accountability, transparency, and effective oversight mechanisms.
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