Decentralization and the Quality of Public Services: Cross-Country Evidence from Educational Data

Abstract

In this paper, we study the impact of fiscal and political decentralization on the quality of public service delivery. While the effect of fiscal decentralization on public services is a recursive theme, to the best of our knowledge, our study is the first to investigate the impact of political decentralization. We use educational data as a proxy for the quality of public services. We use microdata from the PISA test scores from 22 countries and test for the impact of fiscal and political decentralization on students’ performance. We use not only general measures of decentralization but, for the first time, also educationspecific decentralization measures. Our results indicate that the impact of fiscal decentralization on school outcomes is positive. However, the results regarding political decentralization are more ambiguous. We also observe that the scalar effect of both political and economic decentralization becomes more evident in large cities. Keywords: Public services, School outcomes, PISA, fiscal decentralization, political decentralization