Fiscal Decentralization, Macrostability And Growth
AbstractThis paper examines how fiscal decentralization may influence economic growth. Previous research on this question has primarily focused on the direct relationship between decentralization and growth. In this paper, we also incorporate the potential indirect influence of decentralization on growth through its impact on macroeconomic stability. We build an augmented neoclassical model of economic growth that allows for both the direct and indirect effects of fiscal decentralization on economic growth. Using panel data, we find that decentralization appears to reduce the rate of inflation in the sample countries, does not appear to directly influence economic growth, and has an indirect, positive effect on growth through its positive influence on macroeconomic stability. An important contribution of the paper is to identify the role of the indirect effects of fiscal decentralization on economic growth.
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Bibliographic InfoPaper provided by Instituto de Estudios Fiscales in its series Working Papers with number 11-03 Classification-JEL : E62, H77, O20. O40..
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Fiscal Decentralization; Economic Growth; Macroeconomic Stability.;
Other versions of this item:
- Jorge Martínez Vázquez & Robert M. McNab, 2006. "Fiscal decentralization, macrostability and growth," Hacienda Pública Española, IEF, vol. 179(4), pages 25-49, September.
- Jorge Martinez-Vazquez & Robert McNab, 2005. "Fiscal Decentralization,Macrostability, and Growth," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0506, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
- O20 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - General
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
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