FISCAL DECENTRALIZATION INFLUENCE ON PUBLIC SERVICES EFFICIENCY AND ECONOMIC GROWTH

Abstract

Theoretically, fiscal decentralization is associated with growing up in the public administration's efficiency and fostering economic growth. But the mentioned things depend on numerous factors and strongly differ from country to country. This article aims to assess the efficiency of public services, provided by local governments, determine the role of fiscal decentralization in this process, and evaluate the fiscal decentralization impact on economic growth. We found that the highest level of public service quality was demonstrated in Estonia and Slovenia among the 15 counties of Central and Eastern Europe. There was no evidence that fiscal decentralization had strong interconnections with the efficiency of public services. The results showed that revenue decentralization harms the GDP per capita growth and expenditure decentralization has only a tiny positive impact on economic growth in Central and Eastern Europe over the 2010-2022 period. The authors concluded that the efficiency of the local budget's expenditures should be increased, cause the enhancement of the public expenditures-to-GDP ratio would have adverse effects without institutional improvement.

Keywords

• financial decentralization
• local governments
• budget expenditures
• public services
• efficiency of public services
• economic growth