This paper empirically evaluates the impact of fiscal decentralization on
the performance of higher education systems. To test this relationship,
we build up a panel dataset composed of European countries. Countrylevel
performance is measured by an indicator using ranking data. Two
complementary methodologies are used: a dynamic panel approach and
an instrumental variable approach. In both cases, we find that a higher
share of government spending coming from decentralized levels of governments
leads to an improvement of the performance of research-intensive
higher education institutions.