Fiscal governance and regional socio-economic performance: Evidence from Morocco's advanced regionalization

Persistent regional disparities remain a central challenge for sustainable development in many emerging and developing economies, raising questions about how fiscal decentralization relates to territorial socio-economic outcomes. This study examines the relationship between fiscal decentralization and regional socio-economic performance in Morocco during the early implementation phase of advanced regionalization (2017–2023). A composite regional socio-economic index (RSI) is constructed using principal component analysis (PCA) based on twelve indicators aligned with selected Sustainable Development Goals (SDGs), capturing poverty, economic conditions, education, health, and access to basic services. The empirical analysis employs fixed-effects panel regressions, complemented by robustness checks, to assess the association between regional outcomes and three dimensions of fiscal decentralization: fiscal autonomy, dependence on intergovernmental transfers, and the scale of regional public expenditure. The results indicate that higher fiscal autonomy is associated with stronger regional socio-economic outcomes, while greater reliance on central government transfers is associated with weaker performance. By contrast, the size of regional expenditure relative to GDP does not exhibit a consistent relationship with regional outcomes across specifications. These findings provide context-specific evidence from Morocco’s decentralization reform, highlighting that differences in revenue autonomy and transfer dependence are associated with variations in regional socio-economic performance during the early phase of implementation. By providing new subnational evidence from a North African context, this study contributes to the literature on subnational development measurement and fiscal decentralization in emerging economies. • A new SDG-based indicator captures regional sustainability in Morocco. • Large spatial inequalities persist despite decentralization reforms. • Fiscal autonomy significantly improves regional sustainability scores. • Transfer-dependent regions perform worse. • Fiscal governance shapes subnational sustainability and resilience.