Spatial analysis of the effect of financial decentralization on poverty, study of the country's provinces

Document Type : Research Paper


1 Lorestan univercity

2 Associate Professor of Economics, Lorestan University

3 Head of the Faculty of Economics, Kharazmi University

4 Assistant Professor Lorestan University


Considering that from the late 60's and at the same time with the beginning of the first development plan and the beginning of the economic adjustment program, it was expected that some Iranian households would have difficulty in meeting their minimum needs (Khodadad Kashi et al., 2002). It received the attention of many studies. In recent decades, many economic researchers believe that governments will be able to reduce poverty and improve people's livelihoods through the implementation of fiscal decentralization policies. Therefore, the present study, along with other variables affecting poverty, examines the spatial effects of financial decentralization indicators on poverty for the provinces of Iran during the period 2006-2016. The results of the study indicate that financial decentralization of expenditures with coefficient (-0.1373) and financial decentralization of income with coefficient (-0.012) percent have negative and significant effects on poverty. The higher financial decentralization coefficient of expenditures compared to income indicates that Implementing a fiscal decentralization policy will be able to reduce poverty more effectively. In addition, the results of the present study confirm the positive and significant effects of spatial proximity for the provinces of the country.


Main Subjects

  1. Abdillah, K., & Mursinto, D. (2016). The effects of fiscal decentralitation, economic growth and income inequality on poverty rate of Indonesia’s 3 provinces. International Journal of Advanced Research, 4(2), 405-414.
  2. Anselin, L. (1988). Spatial Econometrics: Methods and Models. Kluwer Academic Publisher.
  3. Alm, J., & Boex, J. (2002). An overview of intergovernmental fiscal relations and subnational public finance in Nigeria (No. paper0201). International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  4. Akai, N., & Sakata, M. (2001). Fiscal Decentralization Contributes to Economic Growth: Evidence from State Level Cross Section data for the United States. Journal of urban economics, 52, 93-108.
  5. Ali Khan, S. (2013). Decentralization and poverty reduction: A theoretical framework for exploring the linkages. International Review of Public Administration, 18(2), 145-172
  6. Kyriacou, A. P., Muinelo-Gallo, L., & Roca-Sagalés, O. (2017). Regional inequalities, fiscal decentralization and government quality. Regional Studies, 51(6), 945-957.
  7. Bojanic, A. N. (2018). The impact of fiscal decentralization on growth, inflation and inequality in the Americas. Cepal Review
  8. Gustafsson, B., & Shi, L. (2004). Expenditures on education and health care and poverty in rural China. China Economic Review, 15(3), 292-301.‏
  9. Brown, C. C., & Oates, W. E. (1987). Assistance to the poor in a federal system. Journal of Public Economics, 32, 307–330.
  10. Banwo, M. A. (2012). Fiscal Decentralization Policy and Poverty Reduction: Lessons from Nigeria. International Public Policy Review, 7(1),1-35.
  11. Chaddha, G. K. (2003). Issues in employment and poverty. Discussion Paper 7, Recovery and Reconstruction Department, International Labour Office, Geneva.
  12. Chief Dana, F. (2005). Measuring the Poverty Index and Scan in Iran; Social Welfare Quarterly. Fourth Year. 17 (In Persian).
  13. Feltenstein, A., & Iwata, S. (2005). Decentralization and macroeconomic performance in China: regional autonomy has its costs. Journal of Development Economics, 76(2), 481-501.
  14. Faridi, M. Z., & Nazar, R. (2013). Impact of fiscal autonomy on poverty in Pakistan. Pakistan Journal of Commerce and Social Sciences (PJCSS), 7(1), 141-156.
  15. Clements, B., Mooij, R., Gupta, S., & Keen, M. Income Inequality, Fiscal Decentralization, and Transfer Dependency. In Inequality and Fiscal Policy. INTERNATIONAL MONETARY FUND
  16. Ghaffari, M. (2014). Poverty Reduction Strategies: An Approach to Institutionalist Economics. Journal of Planning and Budget, 19(4), 242-215.
  17. Golkhandan, A. (2019). Spatial Analysis over the Impact of Fiscal Decentralization on the Mortality Rate in Iranian Provinces. Management Strategies in Health System, 4(3), 185-196.
  18. Hiktaop, K., Ulita, A. S., Meilvidiri, W., Herdjiono, M. V. I., & Hayon, P. P. (2020, March). Influence of fiscal decentralization on the economic growth of public welfare and poverty between regions of Province of Papua. In IOP Conference Series: Earth and Environmental Science (Vol. 473, No. 1, p. 012030). IOP Publishing.
  19. Khodadad Kashi, F., Bagheri, F., Heidari, Kh., & Khodadadkashi, O. (2002). Measuring Poverty Indicators in Iran Application of Types of Poverty Line, Poverty Gap, Poverty Index. Economic Statistics Research Group (In Persian).
  20. Lkhagvadorj, A. (2010). Fiscal federalism and decentralization in Mongolia. Universitätsverlag Potsdam.
  21. Litvack, J., Ahmad, J., & Bird, R. (1998). Rethinking decentralization in developing countries. The World Bank
  22. Martinez-Vazquez, J., & McNab, R. M. (2003). Fiscal decentralization and economic growth. World development, 31(9), 1597-1616.
  23. Nursini, N., & Tawakkal. (2019). Poverty alleviation in the contex of fiscal decentralization in Indonesia. Economics and Sociology, 12(1), 270-285.
  24. Oates, W. E. (1993). Fiscal decentralization and economic development. National tax journal, 46(2), 237-243.
  25. Perry, J. L., & Christensen, R. K. (2015). Handbook of public administration. John Wiley & Sons.
  26. Putri, R. N. H., & Saputra, S. P. M. A. (2019). Decentralization and Financial Local Governments Performance: How Does Fiscal Autonomy Affect Spending, Economic Growth, and Poverty in East Java Indonesia?
  27. Rezaei, H., Alizadeh, M., & Nademi, Y. (2017). Study of the effects of spatial index of misery index on health expenditures in selected developing countries. Health management; 8 (1), 57-67 (In Persian).
  28. Suleiman, S. (2009). Local Government, Local problem.
  29. Samti, M., Renani, M., & Teacher, M. (2007). Decentralization and the benefits of forming local governments in terms of increasing efficiency, Journal of Economic Research. 78, 151-123 (In Persian).
  30. Shakibaei, A., Ahmadinejad, M, R., KamaloDini, Z., & Taleghani, F. (2015). The effect of urbanization and its overflows on income distribution in the provinces of Iran with a spatial econometric approach. Quarterly Journal of Applied Theories of Economics, 2(3), 1-23 (In Persian).
  31. Sanogo, T. (2019). Does fiscal decentralization enhance citizens’ access to public services and reduce poverty? Evidence from Côte d’Ivoire municipalities in a conflict setting. World Development, 113, 204-221.
  32. Sacchi, A., & Salotti, S. (2014). The effects of fiscal decentralization on household income inequality: some empirical evidence. Spatial Economic Analysis, 9(2), 202-222
  33. Sepulveda, C. F., & Martinez-Vazquez, J. (2011). The consequences of fiscal decentralization on poverty and income equality. Environment and Planning C: Government and Policy, 29(2), 321-343.Shah, A. (1999). Fiscal federalism and macroeconomic governance: For better or for worse? The World Bank
  34. Sen, A. (1981). Issues in the Measurement of Poverty. In Measurement in Public Choice (pp. 144-166). Palgrave Macmillan, London.
  35. Thiessen, U. (2003). Fiscal decentralisation and economic growth in high‐income OECD Countries. Fiscal studies, 24(3), 237-274.‏
  36. Tiebout, C. M. (1956). A pure theory of local expenditures. Journal of political economy, 64(5), 416-424.
  37. Thiessen, U. (2003). Fiscal decentralisation and economic growth in high‐income OECD Countries. Fiscal studies, 24(3), 237-274.
  38. Jette, C. (2005). Democratic decentralization and poverty reduction: The Bolivian case.
  39. World Bank. (2002). Global Development Report 2000: Fighting Poverty. Translation: Management and Planning Organization; Deputy for Social Affairs; Management and Planning Organization: Tehran.
  40. Wildasin, D. E. (1991). Income redistribution in a common labor market. The American Economic Review, 757-774.