Fiscal decentralization and sustainable development in Africa: an empirical investigation from inequality

Abstract There is no consensus among public economists as to which of the central and local governments should perform the redistributive function. While most authors recommend the centralisation of this function (Tiebout, 1956; Musgrave, 1959; Oates, 1972, Tanzi, 1995), some (Buchanan, 1950; Pauly, 1969; Perotti, 1992) have shown that its decentralisation would be equally if not more effective. This paper analyses the effect of fiscal decentralisation on inequality in Africa over the period 2005–2018. Using a sample of 17 African countries, we estimate a panel data model using the Ordinary Least Squares (OLS), Fixed Effects (FE) and Generalized Moment Method (GMM) in System. Our results show that fiscal decentralization reduces environmental and housing inequalities in Africa. These results remain robust to the use of MMG. We suggest the valorisation of local policies in governance policies in Africa. Jel code: H23, H71.