“Glocalization” and decentralization: The role of local governments in the new international context

Globalization, technological changes and the information revolution are phenomena that affect the ways in which different levels of government allocate their public resources and expenditures. This paper examines one aspect of the problem: the decentralization of the subnational public sector and its relation to economic integration. The study focuses on Argentina and Brazil with a panel data for each country separately, for the period 1985-2005. The results show no relationship between the vertical structure of the subnational public sector and economic openness. There may be two explanations for this: factors working in opposite directions compensate their effects; or interferences from higher levels of government prevent modifications. The control variables have the signs suggested by the theory of fiscal federalism.