An Empirical Study on the Impact of Fiscal Decentralization on the Provision of Public Goods

This chapter uses provincial panel data and a fixed-effects model to examine the impact of fiscal decentralization in total government expenditure, as well as in public security, judicial and law enforcement spending, on crime rates. The results show that neither the decentralization of total government expenditure nor the decentralization of public security, judicial and law enforcement spending significantly affects crime rates. In other words, fiscal decentralization does not significantly impact crime rates. This finding suggests that during the reform process aimed at clarifying the responsibilities and budgetary roles of governments at all levels, it is crucial to consider the unique characteristics of public security activities. These activities often require processing substantial local information and involve significant inter-regional externalities. Therefore, it is essential to clearly define the responsibilities of different government levels, delineate the division of labour between central and local authorities, and enhance information sharing and inter-regional coordination.