Fiscal Decentralization and Subjective Well-Being: A New Perspective Using Dynamic Spatial Panel Model

Year 2025, Volume: 12 Issue: 3, 1083 - 1106, 30.09.2025

Nazmiye Tekdemir , Rüya Karcı , Eda Yeşil

Abstract

This study investigates the effects of fiscal decentralization on the negative dimensions of subjective well-being (e.g., negative affect balance / deprivation) in a sample of 22 European countries over the period 2011–2021. Using dynamic spatial panel data analysis, the research examines how fiscal decentralization shapes perceptions of life quality. The findings reveal no significant relationship between expenditure-side fiscal decentralization and negative affect balance. However, revenue-side fiscal decentralization is found to have a significant and positive impact on the negative dimensions of subjective well-being, indicating that it increases individuals’ negative emotional experiences and perceptions of deprivation. Moreover, the study confirms the presence of significant spatial dependencies on the negative dimensions of subjective well-being, highlighting the role of cross-country interactions in shaping these outcomes. These findings suggest that revenue-side fiscal decentralization may have adverse implications for individuals' life quality, emphasizing the need for policymakers to carefully consider these potential negative effects when designing decentralization policies.

Keywords

fiscal decentralization , subjective well-being , dynamic spatial panel analysis

Ethical Statement

Ethics Committee approval was not required for this study. The authors declare that the study was conducted in accordance with research and publication ethics. The authors confirm that AI tools were partially utilized only for writing, grammar correction, and improving the overall readability of the article. They declare that AI tools were not used in any way that would affect the content and originality of the article, such as generating information and conducting a literature review. The authors declare that there are no financial conflicts of interest involving any institution, organization, or individual associated with this article. Additionally, there are no conflicts of interest among the authors. The authors declare that they contributed equally to all processes of the research.

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