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Fiscal Decentralization and Economic Growth in the United States

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  • Xie, Danyang
  • Zou, Heng-fu
  • Davoodi, Hamid

Abstract

In a simple model of endogenous growth with spending by different levels of government, we demonstrate how fiscal decentralization affects the long-run growth rate of the economy. Applying the model to the U.S. economy, we find that the existing spending shares for state and local governments have been consistent with growth maximization. In this sense, further decentralization in public spending may be harmful for growth.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 45 (1999)
Issue (Month): 2 (March)
Pages: 228-239

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Handle: RePEc:eee:juecon:v:45:y:1999:i:2:p:228-239

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Web page: http://www.elsevier.com/locate/inca/622905

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  1. Alesina, Alberto & Rodrik, Dani, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 109(2), pages 465-90, May.
  2. Davoodi, Hamid & Zou, Heng-fu, 1998. "Fiscal Decentralization and Economic Growth: A Cross-Country Study," Journal of Urban Economics, Elsevier, vol. 43(2), pages 244-257, March.
  3. Tao Zhang & Heng-fu Zou, 1996. "Fiscal decentralization, public spending, and economic growth in China," Policy Research Working Paper Series 1608, The World Bank.
  4. Robert J. Barro, 1988. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
  5. Oates, Wallace E., 1993. "Fiscal Decentralization and Economic Development," National Tax Journal, National Tax Association, vol. 46(2), pages 237-43, June.
  6. Bird, Richard M., 1993. "Threading the Fiscal Labyrinth: Some Issues in Fiscal Decentralization," National Tax Journal, National Tax Association, vol. 46(2), pages 207-27, June.
  7. Oates, Wallace E, 1985. "Searching for Leviathan: An Empirical Study," American Economic Review, American Economic Association, American Economic Association, vol. 75(4), pages 748-57, September.
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