Every now and then, governments of one political persuasion or another ask themselves the question “why don’t we just let the federal government run Australian schools?”. EconomicsÂ doesn’t have a clear answer to this. From a theoretical perspective, more centralisation means greater economies of scale, which means we can doÂ make an education dollar go further. But as Charles Tiebout taught us half a century ago, competition between local jurisdictions can also boost educational outcomes. So we’re left with the oft-heard answer “well, it’s an empirical question”. But a neat paper byÂ Iwan Barankay, one of the brightest young economists in the UK, sheds a little more light on the topic.
Decentralization and the Productive Efficiency of Government:Â Evidence from Swiss Cantons
Iwan Barankay &Â Ben Lockwood
Advocates of fiscal decentralization argue that amongst other benefits, it can increase the efficiency of delivery of government services. This paper is one of the first to evaluate this claim empirically by looking at the association between expenditure decentralization and the productive efficiency of government using a data-set of Swiss cantons. We first provide careful evidence that expenditure decentralization is a powerful proxy for legal local autonomy. Further panel regressions of Swiss cantons provide robust evidence that more decentralization is associated with higher educational attainment. We also show that these gains lead to no adverse effects across education types but that male students benefited more from educational decentralization closing, for the Swiss case, the gender education gap.