Fiscal Decentralisation and Economic Growth: Role of Democratic Institutions
AbstractThis study attempts to analyse the impact of fiscal decentralisation on economic growth. It also examines the complementarity between fiscal decentralisation and democratic institutions in promoting growth. The modelling framework is the endogenous growth model augmented with the measures of fiscal decentralisation and democratic institutions. To capture the multidimensionality, three different measures of fiscal decentralisation are used. The overall analysis shows that revenue decentralisation promotes economic growth while expenditure decentralisation retards economic growth. Composite decentralisation positively influences economic growth implying that simultaneous decentralisation reinforces each other to promote economic growth. Analysis also shows that democratic institutions play a significant role in realising the benefits of fiscal decentralisation. Various policy implications emerge from this study.
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Bibliographic InfoPaper provided by Pakistan Institute of Development Economics in its series PIDE-Working Papers with number 2013:89.
Length: 32 pages
Date of creation: 2013
Date of revision:
Fiscal Decentralisation; Democracy; Economic Growth; Pakistan;
Find related papers by JEL classification:
- C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
- E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
- H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
- H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-06-09 (All new papers)
- NEP-FDG-2013-06-09 (Financial Development & Growth)
- NEP-PBE-2013-06-09 (Public Economics)
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