Decentralization and local government fiscal autonomy: evidence from the Greek municipalities

Despite the widespread international trend toward decentralization, local municipalities in Greece still rely heavily on fiscally centralized revenue sources, thereby achieving a limited extent of tax or other forms of fiscal autonomy. This paper seeks to explain the determinants of local government fiscal autonomy in Greece over the 19992009 year period. By constructing a dataset with disaggregated revenue and expenditure subcategories for the first tier of local government and by applying panel data analysis techniques, it offers unique evidence that socioeconomic and demographic criteria along with political factors affect the level of fiscal autonomy of local government in the country. Our evidence also highlights the distinctive nature of Greece in geographical terms, reporting significant differences across diverse geographical regions (such as islands or mountainous areas). The paper aims at filling in part the gap in the existing research for Greece and at offering some insights from a fiscally centralized country to the current international debate on intracountry fiscal decentralization.