Is fiscal decentralization harmful for economic growth? Evidence from the OECD countries
AbstractThe global drive towards decentralization has been increasingly justified on the basis that greater transfers of resources to subnational governments are expected to deliver greater efficiency in the provision of public goods and services and greater economic growth. This paper examines whether this is the case, by analysing the relationship between decentralization and economic growth in 21 OECD countries during the period between 1990 and 2005 and controlling not only for fiscal decentralization, but also for political and administrative decentralization. The results point towards a negative and significant association between fiscal decentralization and economic growth in the sample countries, a relationship which is robust to the inclusion of a series of control variables and to differences in expenditure preferences by subnational governments. The impact of political and administrative decentralization on economic growth is weaker and sensitive to the definition and measurement of political decentralization.
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Bibliographic InfoPaper provided by Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales in its series Working Papers with number 2010-09.
Date of creation: 24 May 2010
Date of revision:
Publication status: Published in Journal of Economic Geography 11(4), July 2011: 619-643
fiscal decentralization; political decentralization; administrative decentralization; economic growth; OECD;
Other versions of this item:
- 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.
- Roberto Ezcurra & Andrés Rodríguez-Pose, 2010. "Is Fiscal Decentralization Harmful for Economic Growth? Evidence from the OECD Countries," SERC Discussion Papers 0051, Spatial Economics Research Centre, LSE.
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-06-04 (All new papers)
- NEP-CWA-2010-06-04 (Central & Western Asia)
- NEP-EEC-2010-06-04 (European Economics)
- NEP-FDG-2010-06-04 (Financial Development & Growth)
- NEP-GEO-2010-06-04 (Economic Geography)
- NEP-PBE-2010-06-04 (Public Economics)
- NEP-POL-2010-06-04 (Positive Political Economics)
- NEP-URE-2010-06-04 (Urban & Real Estate Economics)
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