IDEAS home Printed from https://ideas.repec.org/a/prg/jnlefa/v2014y2014i1id113.html
   My bibliography  Save this article

Fiscal Decentralisation and Economic Development in Selected Unitary European Countries

Author

Listed:
  • Irena Szarowská

Abstract

The article provides direct empirical evidence on fiscal decentralisation and economic development in selected European countries in a period 1995-2012. The research (based on data taken from OECD Fiscal Decentralisation Database and OECD) is performed on a panel, which contains 17 unitary countries. Explanatory variables are not examined in individual regressions, but study newly uses Generalized Method of Moments. For a model specification, Dynamic Panel Data Model Wizard is applied. Results of dynamic panel analysis suggest positive and statistically significant impact of expenditure decentralisation and stronger but negative effect of revenue decentralisation on economic development. Effect of tax decentralisation seems to be negative but statistically insignificant. These findings are enormously interesting as the relationship between the different decentralisation measures and economic performance evolves in opposite directions and countries tend to increase revenue fiscal decentralisation over the last years.

Suggested Citation

  • Irena Szarowská, 2014. "Fiscal Decentralisation and Economic Development in Selected Unitary European Countries," European Financial and Accounting Journal, Prague University of Economics and Business, vol. 2014(1), pages 22-40.
    • Handle: RePEc:prg:jnlefa:v:2014:y:2014:i:1:id:113
    DOI: 10.18267/j.efaj.113
    as

    Download full text from publisher

    File URL: http://efaj.vse.cz/doi/10.18267/j.efaj.113.html
    Download Restriction: free of charge
    File URL: http://efaj.vse.cz/doi/10.18267/j.efaj.113.pdf
    Download Restriction: free of charge
    File URL: https://libkey.io/10.18267/j.efaj.113?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    2. Iimi, Atsushi, 2005. "Decentralization and economic growth revisited: an empirical note," Journal of Urban Economics, Elsevier, vol. 57(3), pages 449-461, May.
    3. Andrés Rodríguez-Pose & Roberto Ezcurra, 2011. "Is fiscal decentralization harmful for economic growth? Evidence from the OECD countries," Journal of Economic Geography, Oxford University Press, vol. 11(4), pages 619-643, July.
    4. Andrés Rodríguez‐Pose & Anne Krøijer, 2009. "Fiscal Decentralization and Economic Growth in Central and Eastern Europe," Growth and Change, Wiley Blackwell, vol. 40(3), pages 387-417, September.
    5. Brennan,Geoffrey & Buchanan,James M., 2006. "The Power to Tax," Cambridge Books, Cambridge University Press, number 9780521027922.
    6. Martinez-Vazquez, Jorge & McNab, Robert M., 2003. "Fiscal Decentralization and Economic Growth," World Development, Elsevier, vol. 31(9), pages 1597-1616, September.
    7. 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.
    8. Szarowska, Irena, 2013. "Effects of taxation by economic functions on economic growth in the European Union," MPRA Paper 59781, University Library of Munich, Germany.
    9. 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.
    10. Zhang, Tao & Zou, Heng-fu, 1998. "Fiscal decentralization, public spending, and economic growth in China," Journal of Public Economics, Elsevier, vol. 67(2), pages 221-240, February.
    11. Thornton, John, 2007. "Fiscal decentralization and economic growth reconsidered," Journal of Urban Economics, Elsevier, vol. 61(1), pages 64-70, January.
    12. Thushyanthan Baskaran & Lars P. Feld, 2013. "Fiscal Decentralization and Economic Growth in OECD Countries," Public Finance Review, , vol. 41(4), pages 421-445, July.
    13. Hansjörg Blöchliger, 2013. "Decentralisation and Economic Growth - Part 1: How Fiscal Federalism Affects Long-Term Development," OECD Working Papers on Fiscal Federalism 14, OECD Publishing.
    14. Oates, Wallace E., 1993. "Fiscal Decentralization and Economic Development," National Tax Journal, National Tax Association, vol. 46(2), pages 237-43, June.
    15. Hansjörg Blöchliger & Balázs Égert, 2013. "Decentralisation and Economic Growth - Part 2: The Impact on Economic Activity, Productivity and Investment," OECD Working Papers on Fiscal Federalism 15, OECD Publishing.
    16. Akai, Nobuo & Sakata, Masayo, 2002. "Fiscal decentralization contributes to economic growth: evidence from state-level cross-section data for the United States," Journal of Urban Economics, Elsevier, vol. 52(1), pages 93-108, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Olena Chygryn & Yuriy Petrushenko & Alina Vysochyna & Anna Vorontsova, 2018. "Assessment of Fiscal Decentralization Influence on Social and Economic Development," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 14(4), pages 69-84.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yushkov, Andrey, 2015. "Fiscal decentralization and regional economic growth: Theory, empirics, and the Russian experience," Russian Journal of Economics, Elsevier, vol. 1(4), pages 404-418.
    2. Pierre Salmon, 2013. "Decentralization and growth: what if the cross-jurisdiction approach had met a dead end?," Constitutional Political Economy, Springer, vol. 24(2), pages 87-107, June.
    3. Andrés Rodríguez-Pose & Roberto Ezcurra, 2011. "Is fiscal decentralization harmful for economic growth? Evidence from the OECD countries," Journal of Economic Geography, Oxford University Press, vol. 11(4), pages 619-643, July.
    4. Asatryan, Zareh & Feld, Lars P., 2015. "Revisiting the link between growth and federalism: A Bayesian model averaging approach," Journal of Comparative Economics, Elsevier, vol. 43(3), pages 772-781.
    5. Thushyanthan Baskaran & Lars P. Feld & Jan Schnellenbach, 2014. "Fiscal Federalism, Decentralization and Economic Growth: Survey and Meta-Analysis," CESifo Working Paper Series 4985, CESifo.
    6. Cong Minh Huynh & Hoai Nam Tran, 2021. "Moderating effects of corruption and informality on the fiscal decentralization—economic growth nexus: Insights from OECD countries," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 92(2), pages 355-373, June.
    7. Carlos Usabiaga & E. Macarena Hernández-Salmerón, 2016. "Regional Growth and Convergence in Spain: Is the Decentralization Model Important?," EcoMod2016 9358, EcoMod.
    8. Whitney Buser, 2011. "The impact of fiscal decentralization on economics performance in high-income OECD nations: an institutional approach," Public Choice, Springer, vol. 149(1), pages 31-48, October.
    9. Thushyanthan Baskaran & Lars P. Feld & Jan Schnellenbach, 2016. "Fiscal Federalism, Decentralization, And Economic Growth: A Meta-Analysis," Economic Inquiry, Western Economic Association International, vol. 54(3), pages 1445-1463, July.
    10. Jorge Martinez-Vazquez & Santiago Lago-Peñas & Agnese Sacchi, 2017. "The Impact Of Fiscal Decentralization: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 31(4), pages 1095-1129, September.
    11. Bartolini, David & Ninka, Eniel & Santolini, Raffaella, 2017. "Tax Decentralisation, Labour productivity and Employment," MPRA Paper 81070, University Library of Munich, Germany.
    12. Canavire-Bacarreza, Gustavo & Martinez-Vazquez, Jorge & Yedgenov, Bauyrzhan, 2020. "Identifying and disentangling the impact of fiscal decentralization on economic growth," World Development, Elsevier, vol. 127(C).
    13. Burret, Heiko T. & Feld, Lars P. & Schaltegger, Christoph A., 2022. "Fiscal federalism and economic performance new evidence from Switzerland," European Journal of Political Economy, Elsevier, vol. 74(C).
    14. Floriana Cerniglia & Riccarda Longaretti, 2013. "Federalism, education-related public good and growth when agents are heterogeneous," Journal of Economics, Springer, vol. 109(3), pages 271-301, July.
    15. Reingewertz, Yaniv, 2014. "Fiscal Decentralization - a Survey of the Empirical Literature," MPRA Paper 59889, University Library of Munich, Germany.
    16. Lóránd, Balázs & Horváth, Gyula, 2012. "Decentralizáció és gazdasági fejlődés. Az olasz példa [Decentralization and economic development. The case of Italy]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1273-1298.
    17. Abd. Ghani, Judhiana & Grewal, Bhajan & Ahmed, Abdullahi D. & Mohamed Nor, Norashidah, 2019. "Fiscal Decentralisation and Economic Growth in Malaysia: A Market Preserving Federalism Perspective," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 53(1), pages 153-170.
    18. Thushyanthan Baskaran & Lars P. Feld, 2009. "Fiscal Decentralization and Economic Growth in OECD Countries: Is there a Relationship?," CESifo Working Paper Series 2721, CESifo.
    19. Soonae Park & Min-Gean Park & Kyung-Min Nam, 2019. "Growth effects of fiscal decentralization with weak economic motivation: the case of South Korea," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 63(3), pages 399-436, December.
    20. Septimiu-Rares SZABO, 2017. "The Empirical Relationship Between Fiscal Decentralization And Economic Growth: A Review Of Variables, Models And Results," Management Research and Practice, Research Centre in Public Administration and Public Services, Bucharest, Romania, vol. 9(2), pages 47-66, June.

    More about this item

    Keywords

    Dynamic panel data; Economic growth; Fiscal decentralisation;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:prg:jnlefa:v:2014:y:2014:i:1:id:113. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Stanislav Vojir (email available below). General contact details of provider: https://edirc.repec.org/data/uevsecz.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.