Document Type : Article-Based Dissertations


1 PHD Student of Economics, Department of Economics and Accounting, Faculty of Economics,Lorestan University, Lorestan, Iran.

2 Associate Professor of Economics, Department of Economics and Accounting, Faculty of Economics, Lorestan University, Lorestan, Iran (Corresponding Author).

3 full Professor of Economics, Department of Economics, Faculty of Economics and Social Sciences, Bu-Ali Sina University, Hamadan, Iran.


Introduction: Fiscal decentralization can improve the efficiency of public service delivery through preference matching and allocative efficiency. Local governments possess better access to local preferences and, consequently, have an informational advantage over the central government in deciding which provision of goods and services would best satisfy citizens’ needs The implementation of financial decentralization, with the aim of improving management processes and transferring resource management and spending, from the central government to local governments is one of the factors improving the efficiency of public services, including health services. so, the aim of the present study is to investigate the effect of financial decentralization indicators on the efficiency of providing health services in Iran's provinces by spatial econometric method in 2006-2016.

Method: The methodology is based on a two-step approach, estimating efficiency coefficients and analyzing the impact of fiscal decentralization on the latter. In a first step, the efficiency of public service delivery is estimated using stochastic frontier techniques. In a second step, this paper estimates the effects of fiscal decentralization on the estimated efficiencies.

Finding: The results show that there is a nonlinear relationship between decentralization and efficiency, and therefore the optimal value for decentralization can be achieved. Provinces below the optimal value can improve the efficiency of their health services by increasing decentralization. In fact, the initial levels of financial decentralization have a positive effect on efficiency, but after passing the maximum point, the increase in financial decentralization leads to a decrease in the efficiency of public health services.
Discussion :The goal of financial decentralization is to increase the efficiency of health services. But its effective implementation requires the identification of provincial capacities; Therefore, it is recommended that the optimal limit be determined and identified before attempting to decentralize financially.
Thus, by determining an optimal level of decentralization for each province, financial decentralization based on certain goals and based on the capabilities and capacities of the provinces will be operational and similar and equal treatment in this field will be avoided.Financial decentralization emphasizes the proper transfer of taxes and expenditures to different levels of government to improve the production of public goods and services. nonlinear relationship between financial decentralization and the efficiency of health care services indicates the optimal level of financial decentralization. Financial decentralization, if more than the optimal amount, will worsen the efficiency of service delivery due to the cost of decentralization through factors such as increasing corruption, increasing regional inequalities and lack of necessary infrastructure, lack of favorable political and economic environment. Findings under expenditure decentralization and under revenue decentralization point to the need for a favorable institutional and political environment. Effective autonomy of local governments is required to allow preference matching and the allocative efficiency hypothesis to operate. Strong accountability of local authorities vis-à-vis the local population is necessary to allow the productive efficiency hypthesis to operate. Corruption needs to be tackled to prevent misuse of public resources. And capacity needs to be strengthened at the local level. Absent those conditions, fiscal decentralization can worsen public service delivery.


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