Template-Type: ReDIF-Paper 1.0
Handle: RePEc:ida:wpaper:WP2501
Number: WP2501
Creation-Date: 2025-12-15
Length: 34 pages
File-URL: https://repec.ideagov.eu/RePEc/ida/wpaper/WP2501.pdf
File-Format: Application/pdf
File-Function: First version, 2025

Title: Unfunded Mandates, Institutional Quality, and Social Progress: An Analysis for OECD Countries
Abstract: This paper examines the impact of unfunded mandates —defined as the mismatch between political and fiscal decentralisation— on social progress, and how this relationship is contingent upon different levels of institutional quality. Using data from 35 OECD countries over the period 1995–2017 within an Instrumental Variables framework, our results indicate that unfunded mandates are negatively associated to social progress. However, institutional quality plays a crucial role in mitigating these adverse effects. These findings highlight the importance of (i) effective decentralisation design that ensures alignment between its fiscal and political dimensions, and (ii) strengthening institutions to ensure that decentralisation processes positively contribute to national development and social progress.

Classification-JEL: C26, H77, I31, O10
Keywords: fiscal decentralisation, political decentralisation, well-being, institutional quality, OECD

Author-Name: Miriam Hortas-Rico
Author-Name-First: Miriam
Author-Name-Last: Hortas-Rico

Author-Name: David Martínez-Algora
Author-Name-First: David
Author-Name-Last: Martinez-Algora