Presentation delivered during the 13th Annual Meeting of the OECD Network on Fiscal Relations Across Levels of Government, 23-24 November 2017, Paris, France.

1. Globalisation,
decentralisation, and
inclusive growth
Sean M. Dougherty
Senior Advisor
13th Annual Meeting of the Fiscal Network
Joint Session with the Inclusive Growth
Initiative
23 November 2017

2. Background
• Why globalisation?
– Dani Rodrik (JPE, 1998): government size and
openness interact, as a larger government size
helps to offset risks (i.e. terms-of-trade shocks)
– Alberto Alesina (early 2000s): gov’t size and
openness interact, with decentralisation
addressing greater heterogeneity of preferences
– Much less work looking at globalisation and
fiscal decentralisation, especially as they affect
inclusive growth
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3. Globalisation changes the picture
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Central and local government spending responds to
globalisation (openness) in opposite ways
Source: Akgun and Dougherty (2017)

4. Marginal effect of globalisation on growth
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Expenditure decentralisation Revenue decentralisation

5. Marginal effect of globalisation on inequality
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Index of globalisation Index of globalisation
Expenditure decentralisation Revenue decentralisation

6. Main results
• Tradeoffs between growth and equity,
once globalisation is taken into account
• Broadly, decentralisation tends to be
better for growth than for equity
• Many results are country-specific, with
no “easy answers” – it depends where
you are at on the policy topology (i.e. how
centralised or decentralised you are)
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7. 7Twitter @econecho
Forthcoming in the next edition of
the Fiscal Federalism Studies
• Fiscal Decentralisation and
Inclusive Growth
• Based on Workshop in May 2017
• To be launched in early 2018
• Preview on Clearspace very soon
•Website: http://oe.cd/fiscalnetwork