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Decentralization and economic growth in Europe: for whom the bell tolls

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  • Elena Carniti
  • Floriana Cerniglia
  • Riccarda Longaretti
  • Alessandra Michelangeli

Abstract

The effects of fiscal decentralization on economic growth are analyzed. A theoretical framework is developed that builds on the relationships between government size and growth and between decentralization and government size. The framework is tested empirically on a panel of 25 European countries observed between 1995 and 2015. The econometric results show that the relationship between expenditure decentralization and growth is bell shaped. The paper also focuses on expenditure composition. In this respect, the relationship between investment decentralization and growth is an inverted bell-shaped curve: there is a critical mass of decentralized investments beyond which it is possible to enhance growth.

Suggested Citation

  • Elena Carniti & Floriana Cerniglia & Riccarda Longaretti & Alessandra Michelangeli, 2019. "Decentralization and economic growth in Europe: for whom the bell tolls," Regional Studies, Taylor & Francis Journals, vol. 53(6), pages 775-789, June.
    • Handle: RePEc:taf:regstd:v:53:y:2019:i:6:p:775-789
    DOI: 10.1080/00343404.2018.1494382
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    Citations

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    Cited by:

    1. Mihaela Onofrei & Florin Oprea & Corneliu Iaţu & Lenuţa Cojocariu & Sorin Gabriel Anton, 2022. "Fiscal Decentralization, Good Governance and Regional Development—Empirical Evidence in the European Context," Sustainability, MDPI, vol. 14(12), pages 1-15, June.
    2. 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).
    3. Mihaela Onofrei & Lenuta Cojocariu & Florin Oprea, 2021. "Interconnections between local finances and regional development: a study case of Romania," Journal of Financial Studies, Institute of Financial Studies, vol. 10(6), pages 9-32, May.
    4. Tristan Canare, 2021. "Decentralization and Development Outcomes: What Does the Empirical Literature Really Say?," Hacienda Pública Española / Review of Public Economics, IEF, vol. 237(2), pages 111-151, June.
    5. Tristan Canare, 2022. "Decentralization and welfare: Evidence from a panel of countries," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 93(3), pages 767-796, September.
    6. Ruichao Liu & Xiaoyan Zhang & Pengcheng Wang, 2022. "A Study on the Impact of Fiscal Decentralization on Green Development from the Perspective of Government Environmental Preferences," IJERPH, MDPI, vol. 19(16), pages 1-22, August.
    7. Cerniglia, Floriana & Longaretti, Riccarda & Zanardi, Alberto, 2021. "How to design decentralisation to curb secessionist pressures? Top-down vs. bottom-up reforms," Structural Change and Economic Dynamics, Elsevier, vol. 58(C), pages 377-390.
    8. Välilä, Timo, 2020. "Infrastructure and growth: A survey of macro-econometric research," Structural Change and Economic Dynamics, Elsevier, vol. 53(C), pages 39-49.
    9. Feng, Suling & Sui, Bo & Liu, Huimin & Li, Guoxiang, 2020. "Environmental decentralization and innovation in China," Economic Modelling, Elsevier, vol. 93(C), pages 660-674.
    10. Jonathan Muringani, 2022. "Trust as a catalyst for regional growth in a decentralized Europe: The interplay between informal and formal institutions in driving economic growth," Journal of Regional Science, Wiley Blackwell, vol. 62(5), pages 1229-1249, November.

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