Fiscal decentralization and income (re)distribution in OECD countries' regions

Cross-country income inequality has declined in the last decades, but this trend has been paralleled by an increase in within-countries inequality. At the same time, many governments have implemented fiscal decentralization policies, devolving increasing decisionmaking powers on fiscal matters to sub-national levels of government. In this paper, we provide empirical evidence on the relationship between fiscal decentralization and intraregional income redistribution, based on regional level data on inequality and government revenues for 187 regions of 15 OECD countries. Our results how that within region income redistribution is negatively associated with fiscal decentralization, especially when it takes the form of revenue decentralization.