Administrative fragmentation and economic performance of OECD TL2 regions

The present work investigates the relationship between administrative fragmentation and regional per capita GDP growth rate, using a panel of OECD TL2 regions in the period 1996-2011. According to the fiscal decentralisation literature, fragmentation should enhance growth as local governments can implement policies that better match citizens’ needs, thus providing services and public goods in a more efficient way. The presence of many local governments, however, may result in overlapping functions, (dis)economies of scale, and uncoordinated policies.