The Effects of Fiscal Decentralization on the Distribution of Development Opportunities in the Iranian Provinces

Document Type : Original Article


1 PhD Candidate in Economics, Faculty of Social Sciences, Razi University, Kermanshah, Iran

2 Assistant Professor of Economics, Faculty of Social Sciences, Razi University, Kermanshah, Iran

3 Associate Professor of Economics, Faculty of Social Sciences, Razi University, Kermanshah, Iran



Regional equal opportunities are the most important socio-economic challenges, whose inappropriate distribution can have detrimental effects on achieving economic stability and integrated progress of a country. Fiscal decentralization is one of the factors that affect the distribution of development opportunities. For this purpose, in the current research, first, by using the two-stage TOPSIS method, an attempt is made to calculate the composite index of development opportunities in six sectors (cultural-social, educational, infrastructure, health-therapeutic, environmental, and economic), then, the short and long-term effect of fiscal decentralization on the equal distribution of development opportunities in the Iranian provinces spanning from 2006 to 2020 is investigated here by using Panel ARDL. The results imply that the impact of the variables of expenditure and revenue decentralization on the equality of development opportunities is positive in the short term, nevertheless, depending on the levels of development of the provinces, in the long term. Consequently, the more developed the provinces are and have a higher GDP per capita, the more equal the distribution of development opportunities may occur. Furthermore, the model estimation results indicate that there is a negative relationship between economic growth and equality of opportunities in the short term and a positive relationship in the long term. In addition, it was found that the variable of relative population density has a negative and significant effect on the equal distribution of opportunities in the short and long term.


Main Subjects

- Ahmadi, M. & Alikhan Gorgani, R. (2021). The Vertical Balance Financial Decentralization and Regional Development in Iran’s Provinces. The Economic Research (Sustainable Growth and Development), 21(1): 147-182 (In Persian).
- Araujo, S., Bartolini, D., & Redonda, A (2018). Fiscal federalism and regional disparities: evidence from Mexico. Available on
- Attard, J. (2019). Public Debt and economic growth nexus: a dynamic panel ARDL approach. MPRA Paper 96023, University Library of Munich, Germany.
- Azouji, A. (2011). Measurement and Analysis of Regional Labor Market Inequalities in the 4th Development Plan. Planning and Budgeting, 16(2): 83-106 (In Persian).
- Bakour, C., & Abahamid, M.Y. (2019). Regional disparities in development in Morocco: Statistical analyses using dispersion indicators and multidimensional techniques. Available on
- Bartolini, D., Stossberg, S., & Blöchliger, H. (2016). Fiscal decentralization and regional disparities. OECD Economics Department Working Papers 1330, OECD Publishing.
- Bojanic, A.N. (2018). The impact of fiscal decentralization on accountability, economic freedom, and political and civil liberties in the Americas. Economies, 6(1), 1-20.
- Bouyssou, D., Marchant, T., Pirlot, M., Perny, P., Tsoukias, A., & Vincke, P. (2000). Evaluation and decision models: a critical perspective (Vol. 32). Springer Science & Business Media.
- Di Novi, C., Piacenza, M., Robone, S., & Turati, G. (2019). Does fiscal decentralization affect regional disparities in health? Quasi-experimental evidence from Italy. Regional Science and Urban Economics, 78, 103465.
- Eskandariata, M. R., & Mehregan, N. (2020). Assessing the effects of fiscal decentralization on regional inequality in Iran: A spatial panel data approach. The Journal of Economic Policy, 12(23), 225-252 (In Persian).
- Ezcurra, R., & Pascual, P. (2008). Fiscal decentralization and regional disparities: evidence from several European Union countries. Environment and Planning A, 40(5), 1185-1201.
- Fahami, M., Khanzadi, A., & Falahati, A. (2022). Analyzing the Relationship between Opportunities Distribution and Human Development in Iran. Iranian Economic Development Analyses, 8(1), 83-108 (In Persian).
- Faridzad, A. (2017). Impact of Age Groups of Population on Energy Consumption in OPEC Countries. Iranian Economic Development Analyses, 5(3), 71-90. (In Persian)
- Ghaderi, S., Khanzadi, A., & Karimi, M. S. (2021). Evaluating and Analyzing the Effects of Green Tax Policy Enforcement on Renewable Energies Development in Iran. Journal of Development and Capital, 5(2), 105-121 (In Persian).
- Hasanvand, A., Falahati, A., & Soheili, K. (2018). Analyzing the impact of fiscal decentralization on efficiency and improving the performance of health care and treatment in Iran. Yafte, 20 (2), 119-132 (In Persian).
- Khanzadi, A., Heidarian, M., & Moradi, S. (2018). Analyzing the Effects of Fiscal Decentralization on Attracting Private Investment in Provinces of Iran. Journal of Economics and Modeling, 9(1), 89-115 (In Persian).
- Kyriacou, A. P., Muinelo‐Gallo, L., & Roca‐Sagalés, O. (2015). Fiscal decentralization and regional disparities: The importance of good governance. Papers in Regional Science, 94(1), 89-107.
- Lessmann, C. (2012). Regional inequality and decentralization: An empirical analysis. Environment and Planning A, 44(6), 1363-1388.
- Liu, Y. Martinez-Vazquez, J. and Wu, A. M. (2016). Fiscal decentralization, equalization, and intra-provincial inequality in China. International Tax and Public Finance, 23(3), 1-34.
- Makreshanska-Mladenovska, S., & Petrevski, G. (2017). Decentralization, fiscal transfers and income inequality in Central and Eastern European countries. Journal of Eurasian Economic Dialogue, 2(6), 44-54.
- Naghibi, M., & Tanhaie Dilmaqani, M. (2017). Effects of Fiscal decentralization on human development index in Iran. Financial Economics, 11(38), 121-138 (In Persian).
- Nuñez, J., & Tartakowsky, A. (2007). Inequality of Outcomes vs. Inequality of opportunities in a developing country. An exploratory analysis for Chile. Estudios de economía, 34(2), 185-202.
- Onofrei, M., Oprea, F., Iaţu, C., Cojocariu, L., & Anton, S. G. (2022). Fiscal Decentralization, Good Governance and Regional Development-Empirical Evidence in the European Context. Sustainability, 14(12), 7093.
- Partal Gajardo, C.I. (2016). Inequality and its impact on development. Available on
- Pauly, M. (1973). Income redistribution as a local public good. Journal of Public Economics, 2, 35-58.
- Prud’homme, R. (1995). The dangers of decentralization. The World Bank Research Observer, 10(2), 201-220.
- Rodríguez-Pose, A., & Ezcurra, R. (2010). Does decentralization matter for regional disparities? A cross-country analysis. Journal of Economic Geography, 10(5), 619-644.
- Rodríguez-Pose, A., & Gill, N. (2004). Is there a global link between regional disparities and devolution? Environment and planning A, 36(12), 2097-2117.
- Sacchi, A., & Salotti, S. (2014). The effects of fiscal decentralization on household income inequality: some empirical evidence. Spatial Economic Analysis, 9(2), 202-222.
- Sadeghi Shahdani, M., Komijani, A., Zahedi Vafa, M. H., & Ghaffary Fard, M. (2012). The Impact of Fiscal Decentralization on Economic Growth and Income Distribution in Provinces of Iran. Economics Research, 12(47), 97-122 (In Persian).
- Sameti, M., Farahmand, S., Moosavi, M. (2014). Analyzing the Effects of Fiscal Decentralization on Interaction between Growth and Equitable Distribution of Fiscal Resources in Provinces of Iran (2001-2007). Economic Research (Sustainable Growth and Development), 14 (3), 1-22 (In Persian).
- Schneider, A. (2003). Decentralization: Conceptualization and measurement. Studies in comparative international development, 38, 32-56.
- Siburian, M. E. (2020). Fiscal decentralization and regional income inequality: evidence from Indonesia. Applied Economics Letters, 27(17), 1383-1386.
- Simanjuntak, T. H., & Mukhlis, I. (2016). The relation of fiscal decentralization, regional finance and social justice for the local development of Indonesia. Applied Economics and Finance, 4(1), 9-17.
- Sow, M., & Razafimahefa, M.I.F. (2017). Fiscal decentralization and fiscal policy performance. International Monetary Fund.
- Stegarescu, D. (2005). Public sector decentralization: Measurement concepts and recent international trends. Fiscal studies, 26(3), 301-333.
- Ter-Minassian, M. T. (Ed.). (1997). Fiscal federalism in theory and practice. International Monetary Fund
- Tresch, R.W. (2002). Public Finance: A Normative Theory. 2nd edition, Elsevier Science, USA
- Wang, D., Zhang, E., & Liao, H. (2022). Does fiscal decentralization affect regional high-quality development by changing peoples’ livelihood expenditure preferences: Provincial evidence from China. Land, 11(9), 1407.
- Williamson, J. G. (1965). Regional inequality and the process of national development: a description of the patterns. Economic development and cultural change, 13(4, Part 2), 1-84.