the same result. De Mello and Barenstein (2001) based upon cross-country data concluded that tax decentralization was positively associated with improved quality of governance. Fisman and Gatti (2002) found a negative relations between fiscal decentralization and corruption. Gurgur and Shah (2002) identify major drivers of corruption in order to isolate the effect of decentralization. In a sample of industrial and non-industrial countries, lack of service orientation in the public sector, weak democratic institutions, economic isolation (closed economy), colonial past, internal bureaucratic controls and centralized decision making are identified as the major causes of corruption. For a non-industrial countries sample, drivers for corruption are lack of service orientation in the public sector, weak democratic institutions and closed economy. Decentralization has a greater negative impact on corruption in unitary countries than in federal countries. They concluded that decentralization was confirmed here to support greater accountability in the public sector and reduced corruption. Dincer et al. (2006) using data for US states finds that localization by inducing yardstick competition discourages corruption.

# 3 Measuring decentralization

Decentralization attempts to move public sector decision making closer to the people. The existing literature has treated decentralization to be synonymous with subnational governance. This is clearly an indefensible view as intermediate orders of government in large federal countries may be farther removed from people than the central government in smaller unitary states. Therefore it would be inappropriate to compare provinces in Canada or states in Brazil, India, or the USA with municipalities, say, in Greece. After all, central governments of small countries (Monaco, Lichtenstein, etc.) can themselves be considered as fully-decentralized local governments. In view of this local government serves as a better unit of analysis for comparative analysis of decentralization.

As an aside, another example of inappropriate choice of units for comparative analysis is in Fan et al. (2009), where the authors create a dummy variable, which is equal to 1 when the executive bodies at the lowest tier of government are elected. As a result, say Bangladesh gets 0, and Indonesia gets 1. However, the average population of a lowest unit in Indonesia is about 0.5 million, while in Bangladesh (according to the definitions in the paper) it is about 100 people. There are elected executive bodies in Bangladesh at a level of units with population even less than 0.5 million, which implies that Bangladesh may be more politically decentralized than Indonesia.

Once local government is selected as the unit for comparative analysis, one must also pay attention to the structure of local government as local government is not a monolithic entity in most countries. If horizontal interjurisdictional competition (exit) is conjectured to be the outcome of increased decentralization than it is the mobility of residents and businesses - both inside a country and internationally, and availability of options for exit that should matter when comparing units of government in different countries. For both arguments - be it either voice or exit - the administrative structure of local government is of paramount importance .

We adopt the following general structure of a government. General government 5