Fiscal Decentralization and Human Development: Some Evidence from Argentina

Fiscal decentralization implies a transfer of resources (tax revenues) from the federal government to the provincial governments (which were previously being spent by the former). Those in favor of decentralization would argue that this is conducive to human development due to a host of reasons not least because local governments are believed to be more in touch with local needs, tastes and culture. This leads a to a better selection of development projects as well as a more efficient implementation of the same. Using macro level data we test this hypothesis in the case of Argentina, using data from 1970–1994. We pick two crucial sectors for development health and education and test whether decentralization had any impact on these. The evidence we find on decentralization is mixed. ∗Submitted to fulfill the Econometrics paper requirement of the Ph.D program. I wish to thank Diego Miranda for the data, Gustav Ranis for overall supervision and encouragement and Michael Boozer and Christopher Udry for many helpful suggestions, as well as seminar participants at Yale University. Most of this work was funded under a research assistantship from the Yale Center for International and Area Studies, New Haven, CT. †Corresponding Address: Department of Economics, Yale University. 37 Hillhouse Avenue, New Haven.