Fiscal Decentralization and Economic Growth in Central and Eastern Europe
AbstractThe majority of the literature on fiscal decentralization has tended to stress that the greater capacity of decentralized governments to tailor policies to local preferences and to be innovative in the provision of policies and public services, the greater the potential for economic efficiency and growth. There is, however, little empirical evidence to substantiate this claim. In this paper we examine, using a panel data approach with dynamic effects, the relationship between the level of fiscal decentralization and economic growth rates across 16 Central and Eastern European countries over the 1990-2004 period. Our findings suggest that, contrary to the majority view, there is a significant negative relationship between two out of three fiscal decentralization indicators included in the analysis and economic growth. However, the use of different time lags allows us to nuance this negative view and show that long-term effects vary depending on the type of decentralization undertaken in each of the countries considered. While expenditure at and transfers to sub-national tiers of government are negatively correlated with economic growth, taxes assigned at the sub-national level evolve from having a significantly negative to a significantly positive correlation with the national growth rate. This supports the view that sub-national governments with their own revenue source respond better to local demands and promote greater economic efficiency Copyright (c) 2009 Wiley Periodicals, Inc..
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Gatton College of Business and Economics, University of Kentucky in its journal Growth and Change.
Volume (Year): 40 (2009)
Issue (Month): 3 ()
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0017-4815
Other versions of this item:
- Andrés Rodríguez-Pose & Anne Krøijer, 2009. "Fiscal decentralization and economic growth in Central and Eastern Europe," LSE Research Online Documents on Economics 53357, London School of Economics and Political Science, LSE Library.
- Andrés Rodríguez-Pose & Anne Krøijer, 2010. "Fiscal Decentralization and Economic Growth in Central and Eastern Europe," LEQS â LSE 'Europe in Question' Discussion Paper Series 12, European Institute, LSE.
- Andrés Rodríguez-Pose and Anne Krøijer, 2009. "Fiscal Decentralization and Economic Growth in Central and Eastern Europe," Europe in Question Discussion Paper Series of the London School of Economics (LEQs) 2, London School of Economics / European Institute.
- Andrés Rodríguez-Pose & Anne Krøijer, 2008. "Fiscal decentralization and economic growth in Central and Eastern Europe," Working Papers 2008-08, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
- H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Brennan,Geoffrey & Buchanan,James M., 2006.
"The Power to Tax,"
Cambridge University Press, number 9780521027922, December.
- Ulrich Thießen, 2003. "Fiscal Decentralisation and Economic Growth in High-Income OECD Countries," Fiscal Studies, Institute for Fiscal Studies, vol. 24(3), pages 237-274, September.
- Arzaghi, Mohammad & Henderson, J. Vernon, 2005. "Why countries are fiscally decentralizing," Journal of Public Economics, Elsevier, vol. 89(7), pages 1157-1189, July.
- Martinez-Vazquez, Jorge & McNab, Robert M., 2003.
"Fiscal Decentralization and Economic Growth,"
Elsevier, vol. 31(9), pages 1597-1616, September.
- Jorge Martinez-Vazquez & Robert McNab, 2001. "Fiscal Decentralization and Economic Growth," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0101, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
- Anping Chen & Nicolaas Groenewold, 2011. "The National and Regional Effects of Fiscal Decentralisation in China," Economics Discussion / Working Papers 11-18, The University of Western Australia, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.