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Fiscal Decentralisation and Economic Growth in the OECD

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Phil Bodman () (MRG - School of Economics, The University of Queensland)
Kathryn Ford

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Abstract

What impact, if any, does fiscal decentralisation have on economic growth? Further investigations of the inter-relationships between fiscal decentralisation and economic growth are timely given that government decentralisation remains at the forefront of many OECD policy agendas. The study incorporates new measures of fiscal decentralisation to better account for the impact of different levels of subnational fiscal autonomy on economic growth. The analysis also considers the impact of previously omitted public sector decentralisation variables that provide further indication of the extent to which subnational governments are ‘closer to the people’ and potentially better able to account for local preferences in fiscal decision-making. Whilst little evidence of a direct relationship between fiscal decentralisation and output growth is found, some evidence is found to support the hypothesis that a medium degree of fiscal decentralisation is positively related to growth in the capital stock and the level of human capital.

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Paper provided by School of Economics, University of Queensland, Australia in its series MRG Discussion Paper Series with number 0706.

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Handle: RePEc:qld:uqmrg6:07

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  20. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May. [Downloadable!] (restricted)
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  21. Nuxoll, Daniel A, 1994. "Differences in Relative Prices and International Differences in Growth Rates," American Economic Review, American Economic Association, vol. 84(5), pages 1423-36, December. [Downloadable!] (restricted)
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  23. Nouriel Roubini & Jeffrey Sachs, 1988. "Political and Economic Determinants of Budget Deficits in the IndustrialDemocracies," NBER Working Papers 2682, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  1. ESTEBAN, Sonia & DE FRUTOS, Pablo & PRIETO; Maria Jose, 2008. "Fiscal Decentralization And Economic Growth. Empiric Evidence From A Regional Perspective," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 8(1), pages 29-58. [Downloadable!] (restricted)
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