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1、∗DecentralizationandPoliticalInstitutions∗∗∗∗∗RubenEnikolopovandEkaterinaZhuravskayaMarch2004Abstract:Doesfiscaldecentralizationleadtomoreefficientgovernance,betterpublicgoods,andhighereconomicgrowth?Thispapertestshypothesesofthetheoreticalliteraturethatresultsofdecentralizationdependonfeaturesof
2、politicalinstitutions.Usingdatafromupto95countriesfor25yearsweshowthattheeffectoffiscaldecentralizationstronglydependsontwoaspectsofpoliticalcentralization:1)strengthofnationalpartysystem(measuredbytheageofmainpartiesandfractionalizationofgovernmentparties)and2)subordination(whetherlocalandstatee
3、xecutivesareappointedorelected).WefindsolidsupportforRiker’stheory(1964):indevelopingcountries,strongpartiessignificantlyimprovetheresultsoffiscaldecentralizationforeconomicgrowth,qualityofgovernment,andpublicgoodsprovision.Thereisalsosomeevidencefromdevelopingcountriesthatadministrativesubordina
4、tionoflocaltohigher-levelauthoritiesimprovesdecentralizationresults.∗WethankAlbertoAlesina,ScottGelhbach,SergeiGuriev,JamesHines,RoryMacFarquhar,GérardRoland,AndreiShleifer,KonstantinSonin,BarryWeingast,LuigiZingales,twoanonymousrefereesandseminarparticipantsattheUniversityofMichigan,CenterforEco
5、nomicandFinancialResearch,NewEconomicSchool,LondonBusinessSchool,UniversityofCalifornia,Berkeley,InstituteforAdvanceStudyinPrinceton,HarvardUniversity,PrincetonUniversity,andparticipantsofCEPR-WDI2003TransitionConferenceforusefulcomments.TheworkofRubenEnikolopovwasinpartsupportedbyaprogramoftheBu
6、reauofEducationalandCulturalAffairs,U.S.DepartmentofState,administeredbytheAmericanCouncilforInternationalEducation.TheviewsexpressedhereinareoftheauthorsandnotnecessarilysharedbyECAorAC.∗∗HarvardUniversityandCenterforEconomicandFinancialResearch(CEFIR),enikolop@fas.harvard.edu.∗∗∗InstituteforAdv
7、ancedStudy,Princeton;CenterforEconomicandFinancialResearch(CEFIR);andCEPR,zhuravsk@ias.edu.11.IntroductionModerneconomicliteraturehaslittledoubtthateconomicdecentralizationaffectsthequalityofgovernment,economicgrowth,a
