Unfunded Mandates and the Economic Impact of Decentralisation. When Finance Does Not Follow Function

Decentralisation has frequently been sold as a means to increase well-being and development. Yet, questions remain whether decentralisation improves economic performance. This is possibly because processes have often led ‘unfunded mandates’, that is, mismatch between the powers transferred subnational tiers of government resources allocated them. In this article, we analyse how unfunded mandates shape regional growth across 518 regions in 30 Organisation for Economic Co-operation Development countries over period 1997–2018. There negative, statistically significant, robust impact on growth. effect higher more politically less fiscally decentralised with level wealth. Unfunded thus represent serious drag potential positive political decentralisation. Hence, those benefits materialise, better not – ensuring finance follows function should be pursued.