Financial decentralization and territorial inequalities in Morocco: an empirical analysis

Abstract

Financial decentralization and its effects on territorial inequalities are a major issue in public economics and territorial development. This study analyzes the effect of financial decentralization on territorial inequalities in Morocco over the period 2014–2022. Territorial inequality is measured by a territorial Gini index, while financial decentralization is apprehended through revenue-side decentralization indices, interpreted as an indicator of local fiscal autonomy, and expenditure-side decentralization, reflecting the share of local budget execution in public spending. The analysis relies on a first-difference model estimated by ordinary least squares, with standard errors corrected using the Newey–West method to account for potential issues of autocorrelation and heteroskedasticity in the errors. The results show that local fiscal autonomy significantly contributes to reducing territorial inequalities, while expenditure decentralization has a positive but statistically more fragile effect. Territorial inequalities appear persistent, suggesting the existence of structural determinants related to the economic, fiscal, and institutional capacities of the regions.

JEL Classification: H71; H72; H77; O55; C22.

Paper type: Empirical research.