Fiscal Decentralization and Gender Equality in Developing Economies: Dynamics of Income Groups in Economies and Corruption

Abstract

A large number of studies on fiscal decentralization have supported the claim that decentralized governments have a greater capacity to approach local preferences and have greater potential for public service delivery, which demonstrates a favorable status of socioeconomic indicators. However, there is no empirical evidence on fiscal decentralization and gender equality. This study empirically examines the effect of fiscal decentralization on gender equality in 29 developing economies from 2006 to 2020 by employing the dynamic panel system generalized method of moments (GMM). The study uses three measures of fiscal decentralization—expenditure, revenue, and composite decentralization—to learn the dynamics of income groups in developing economies, and corruption from the perspective of fiscal decentralization and gender equality. The results demonstrate that fiscal decentralization improves gender equality in the sample of developing economies as well as in the sub-sample of developing economies, i.e., lower-middle income countries and upper-middle income countries subject to the control of corruption, otherwise fiscal decentralization may devastate gender equality in developing economies and upper-middle income economies. Corruption plays a dynamic role in the relationship between fiscal decentralization and gender equality. The desired results of fiscal decentralization may be attained through policy reforms to control corruption. The dynamics of income groups in the sampled economies also have implications for the relationship between fiscal decentralization and gender equality.