The impact of fiscal decentralization on infant mortality rates: evidence from OECD countries.

This study re-examines the hypothesis that shifts towards more decentralization would be accompanied by improvements in population health on a panel of 20 OECD countries over a thirty year period (1970-2001). Decentralization is proxied using a conventional indicator of revenue decentralization and a new measure of fiscal decentralization that reflects better than previous measures the existence of autonomy in the decision-making authority of lower tiers of government, a crucial issue in the decentralization process. The results show a considerable and positive effect of fiscal decentralization on infant mortality only if a substantial degree of autonomy in the sources of revenue is devolved to local governments. The proportion of health care expenditure on GDP and, in particular, education, were found to have a larger contribution to the reduction of infant mortality in the sample of OECD countries analysed over the period of study.