Fiscal Decentralization and Federalism in Latin America
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In contrast to years of centralization when the national government dominated the states and municipalities, fiscal decentralization is now taking place throughout Latin America. This study considers the reasons for this change. Fiscal decentralization merits separate attention because the financial independence of subnational governments ultimately determines their success and power. Competing political and economic explanations are tested on a sample of 17 countries between 1985 and 1995. While federalism is a significant predictor of greater fiscal decentralization, other factors such as presidential power, structural adjustment, level of development, and country size also determine the level of fiscal decentralization.
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