Please Scroll down for Article Fiscal Decentralisation, Institutional Quality and Ethnic Conflict: a Panel Data Analysis, 1985-2001

This article may be used for research, teaching and private study purposes. Any substantial or systematic reproduction, redistribution , reselling , loan or sub-licensing, systematic supply or distribution in any form to anyone is expressly forbidden. The publisher does not give any warranty express or implied or make any representation that the contents will be complete or accurate or up to date. The accuracy of any instructions, formulae and drug doses should be independently verified with primary sources. The publisher shall not be liable for any loss, actions, claims, proceedings, demand or costs or damages whatsoever or howsoever caused arising directly or indirectly in connection with or arising out of the use of this material. Fiscal decentralisation is increasing throughout the world, especially in developing countries where it is argued to foster good governance and delivery of public goods. Fiscal decentralisation is also widely promoted as an institutional device to manage ethnic conflict. Proponents of fiscal decentralisation claim that it helps accommodate ethnic minorities by granting them considerable policy-making authority. However, the empirical literature on ethnic conflict has mainly focused on federalism and political decentralisation while the few studies that have included fiscal decentralisation have produced mixed results. In this paper, I test the effect of fiscal decentralisation on ethnic conflict while emphasising state capacities as a crucial mediating variable. I assume that fiscal decentralisation is unlikely to produce any effect in countries characterised by low state capacities and weak institutions. The rationale is threefold. (i) State capacities are usually lower at the local level than at the central level; yet implementing fiscal decentralisation requires that subunits are endowed with sufficient bureaucratic and technical competences. (ii) Devolution of policy-making authority to lower tiers of governments is usually assumed more genuine in countries characterised by good governance. (iii) When state capacities are weak, ethnic groups may be tempted to claim more than fiscal decentralisation and seek independence. I assume also that minorities that are the most ethnically distant from the rest of the population are those that should benefit most from fiscal decentralisation. The system GMM estimations confirm that ethnically distinctive minorities benefit Jean-Pierre Tranchant is a doctoral candidate at the Centre d'Etude et de Recherches sur le Dé veloppement International (CERDI) at the University of Auvergne. His research interests include the economics of conflict, ethnicity, and decentralisation and institutions. more from fiscal decentralisation. Regarding state capacities, findings are radically different …