Fiscal Decentralization and Economic Growth in Central and Eastern Europe
The majority of the literature on fiscal decentralization has tended to stress that the greater capacity of decentralized governments to tailor policies to local preferences and to be innovative in the provision of policies and public services, the greater the potential for economic efficiency and growth. There is, however, little empirical evidence to substantiate this claim. In this paper we examine, using a panel data approach with dynamic effects, the relationship between the level of fiscal decentralization and economic growth rates across 16 Central and Eastern European countries over the 1990-2004 period. Our findings suggest that, contrary to the majority view, there is a significant negative relationship between two out of three fiscal decentralization indicators included in the analysis and economic growth. However, the use of different time lags allows us to nuance this negative view and show that long-term effects vary depending on the type of decentralization undertaken in each of the countries considered. While expenditure at and transfers to sub-national tiers of government are negatively correlated with economic growth, taxes assigned at the sub-national level evolve from having a significantly negative to a significantly positive correlation with the national growth rate. This supports the view that sub-national governments with their own revenue source respond better to local demands and promote greater economic efficiency Copyright (c) 2009 Wiley Periodicals, Inc..
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 40 (2009)
Issue (Month): 3 ()
|Contact details of provider:|| Web page: http://www.blackwellpublishing.com/journal.asp?ref=0017-4815|
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=0017-4815|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Andrés Rodríguez-Pose & Adala Bwire, 2004. "The economic (in)efficiency of devolution," Environment and Planning A, Pion Ltd, London, vol. 36(11), pages 1907-1928, November.
- Caselli, Francesco & Wilson, Daniel J., 2004.
Journal of Monetary Economics,
Elsevier, vol. 51(1), pages 1-32, January.
- Alberto Alesina & Enrico Spolaore, 1997.
"On the Number and Size of Nations,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 112(4), pages 1027-1056.
- Richard M. Bird, 2000. "Intergovernmental Fiscal Relations: Universal Principles, Local Applications," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0002, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
- Jorge Martinez-Vazquez & Robert McNab, 2001.
"Fiscal Decentralization and Economic Growth,"
International Center for Public Policy Working Paper Series, at AYSPS, GSU
paper0101, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
- Timothy Besley & Robin Burgess, 2000.
"The political economy of government responsiveness: theory and evidence from India,"
LSE Research Online Documents on Economics
2308, London School of Economics and Political Science, LSE Library.
- Timothy Besley & Robin Burgess, 2002. "The Political Economy of Government Responsiveness: Theory and Evidence from India," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1415-1451.
- Besley, Timothy J. & Burgess, Robin, 2001. "The Political Economy of Government Responsiveness: Theory and Evidence from India," CEPR Discussion Papers 2721, C.E.P.R. Discussion Papers.
- Timothy Besley & Robin Burgess, 2000. "The Political Economy of Government Responsiveness: Theory and Evidence from India," STICERD - Development Economics Papers - From 2008 this series has been superseded by Economic Organisation and Public Policy Discussion Papers 28, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Gary Woller & Kerk Phillips, 1998. "Fiscal decentralisation and IDC economic growth: An empirical investigation," Journal of Development Studies, Taylor & Francis Journals, vol. 34(4), pages 139-148.
- Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
- Arzaghi, Mohammad & Henderson, J. Vernon, 2005. "Why countries are fiscally decentralizing," Journal of Public Economics, Elsevier, vol. 89(7), pages 1157-1189, July.
- Pagan, Adrian, 1984. "Econometric Issues in the Analysis of Regressions with Generated Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 221-47, February.
- Andrés Rodríguez-Pose & Richard Sandall, 2008. "From identity to the economy: analysing the evolution of the decentralisation discourse," Environment and Planning C: Government and Policy, Pion Ltd, London, vol. 26(1), pages 54-72, February.
- Era Dabla-Norris, 2006. "The Challenge of Fiscal Decentralisation in Transition Countries," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 48(1), pages 100-131, March.
- Ebel, Robert D. & Yilmaz, Serdar, 2002. "On the measurement and impact of fiscal decentralization," Policy Research Working Paper Series 2809, The World Bank.
- Andres Rodriguez-Pose & Nicholas Gill, 2005. "On the 'economic dividend' of devolution," Regional Studies, Taylor & Francis Journals, vol. 39(4), pages 405-420.
- Andres RodrIguez-Pose & Ugo Fratesi†, 2004.
"Between Development and Social Policies: The Impact of European Structural Funds in Objective 1 Regions,"
Taylor & Francis Journals, vol. 38(1), pages 97-113.
- Andrés Rodríguez-Pose & Ugo Fratesi, 2003. "Between development and social policies: the impact of European Structural Funds in Objective 1 Regions," European Economy Group Working Papers 28, European Economy Group.
- Barro, Robert J & Lee, Jong Wha, 1996. "International Measures of Schooling Years and Schooling Quality," American Economic Review, American Economic Association, vol. 86(2), pages 218-23, May.
- N. Gregory Mankiw & David Romer & David N. Weil, 1992.
"A Contribution to the Empirics of Economic Growth,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 107(2), pages 407-437.
- Ulrich Thießen, 2003. "Fiscal Decentralisation and Economic Growth in High-Income OECD Countries," Fiscal Studies, Institute for Fiscal Studies, vol. 24(3), pages 237-274, September.
- Davoodi, Hamid & Zou, Heng-fu, 1998.
"Fiscal Decentralization and Economic Growth: A Cross-Country Study,"
Journal of Urban Economics,
Elsevier, vol. 43(2), pages 244-257, March.
- Hamid Davoodi & Heng-fu Zou, 1996. "Fiscal Decentralization and Economic Growth: A Cross-Country Study," CEMA Working Papers 98, China Economics and Management Academy, Central University of Finance and Economics.
- Kevin Morgan, 2007. "The Polycentric State: New Spaces of Empowerment and Engagement?," Regional Studies, Taylor & Francis Journals, vol. 41(9), pages 1237-1251.
- Bardhan, Pranab & Mookherjee, Dilip, 2005. "Decentralizing antipoverty program delivery in developing countries," Journal of Public Economics, Elsevier, vol. 89(4), pages 675-704, April.
- Andrés Rodríguez-Pose & Nicholas Gill, 2003. "The global trend towards devolution and its implications," Environment and Planning C: Government and Policy, Pion Ltd, London, vol. 21(3), pages 333-351, June.
- Jeni Klugman, 1994. "Decentralization: A Survey of Literature from a Human Development Perspective," Human Development Occasional Papers (1992-2007) HDOCPA-1994-05, Human Development Report Office (HDRO), United Nations Development Programme (UNDP).
- Panizza, Ugo, 1999. "On the determinants of fiscal centralization: Theory and evidence," Journal of Public Economics, Elsevier, vol. 74(1), pages 97-139, October.
When requesting a correction, please mention this item's handle: RePEc:bla:growch:v:40:y:2009:i:3:p:387-417. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.