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Impact of Fiscal Decentralisation on Human Development: A Case Study of Pakistan

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Author Info

  • Rashid Mehmood

    (Applied Economics Research Centre, Karachi)

  • Sara Sadiq

    (Applied Economics Research Centre, Karachi)

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    Abstract

    It is often debated among economists whether the efficiency of sub-national governments is different and better for the provision of services than that of national governments. Most of the previous studies show that fiscal transfers increase the responsibilities of sub-national governments and enhance the ability for revenue generation. The main focus of this study is to analyse the relationship between human development and fiscal decentralisation; to find out the channels through which decentralisation stimulates the pace of economic growth and affects the provision of health and education facilities across the provinces. By using econometric time series techniques for empirical analysis, we find that there exists a long-run relationship between fiscal decentralisation and human development along with urbanisation. Results suggest that the effectiveness of fiscal decentralisation can increase human development; it also strengthens the federation by creating harmony among the provinces.

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    Bibliographic Info

    Article provided by Pakistan Institute of Development Economics in its journal The Pakistan Development Review.

    Volume (Year): 49 (2010)
    Issue (Month): 4 ()
    Pages: 513–530

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    Handle: RePEc:pid:journl:v:49:y:2010:i:4:p:513-530

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    Related research

    Keywords: Fiscal Decentralisation; Human Development;

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    1. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
    2. SALMON, Pierre, 1987. "Decentralization as an incentive scheme," Institut des Mathématiques Economiques – Document de travail de l’I.M.E. (1974-1993) 98, Institut des Mathématiques Economiques. LATEC, Laboratoire d'Analyse et des Techniques EConomiques, CNRS, Université de Bourgogne.
    3. Ahmad, Iftikhar & Mustafa, Usman & Khalid, Mahmood, 2007. "National Finance Commission Awards in Pakistan: A Historical Perspective," MPRA Paper 5249, University Library of Munich, Germany.
    4. Dan Stegarescu, 2005. "Public sector decentralisation: measurement concepts and recent international trends," Fiscal Studies, Institute for Fiscal Studies, vol. 26(3), pages 301-333, September.
    5. Tao Zhang & Heng-fu Zou, 1996. "Fiscal decentralization, public spending, and economic growth in China," Policy Research Working Paper Series 1608, The World Bank.
    6. Wallace E. Oates, 1999. "An Essay on Fiscal Federalism," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1120-1149, September.
    7. Yingyi Qian & Barry R. Weingast, 1997. "Federalism as a Commitment to Preserving Market Incentives," Working Papers 97042, Stanford University, Department of Economics.
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