Fiscal decentralization and social stability in selected developing countries: the role of institutional quality

The degree of fiscal decentralization is important in terms of economic, social, and political sustainability since it can improve social stability, especially in countries that have established strong institutions. This research disentangled the relationship between fiscal decentralization and internal conflict in 18 developing countries from 1990 to 2019. Additionally, the study assessed the importance of institutional quality in developing the fiscal decentralization-conflict nexus. The study also looked at how institutional quality affected the relationship between fiscal decentralization and conflict. The quantitative methodology relied on a panel analysis of count data. Because the dependent variable showed overdispersion, this study elected to use negative binomial regressions within the Fixed Effects (FE) framework. When democracy was examined, the data revealed that both revenue and spending decentralization had a negative and significant impact on conflict. However, when government quality was factored in, both were found to be positive and substantial predictors of conflict. Furthermore, democracy and government quality had a negative and significant effect on conflict resolution. The study also found that horizontal inequality, population, poverty, and education had a positive and significant impact on conflict, but there was no significant effect of vertical inequality. Moreover, there was a negative and significant impact of per capita income on conflict.