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Fiscal Decentralization and Economic Growth in the United States

  • Xie, Danyang
  • Zou, Heng-fu
  • Davoodi, Hamid

In a simple model of endogenous growth with spending by different levels of government, we demonstrate how fiscal decentralization affects the long-run growth rate of the economy. Applying the model to the U.S. economy, we find that the existing spending shares for state and local governments have been consistent with growth maximization. In this sense, further decentralization in public spending may be harmful for growth.

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File URL: http://www.sciencedirect.com/science/article/B6WMG-45M7VF0-2/2/b7403cfea789a01483f3e27791fe0458
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Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 45 (1999)
Issue (Month): 2 (March)
Pages: 228-239

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Handle: RePEc:eee:juecon:v:45:y:1999:i:2:p:228-239
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622905

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  1. 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.
  2. Alesina, Alberto F & Rodrik, Dani, 1991. "Distributive Politics and Economic Growth," CEPR Discussion Papers 565, C.E.P.R. Discussion Papers.
  3. Robert J. Barro, 1988. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
  4. Tao Zhang & Heng-fu Zou, 2001. "Fiscal decentralization, public spending, and economic growth in China," CEMA Working Papers 58, China Economics and Management Academy, Central University of Finance and Economics.
  5. Oates, Wallace E, 1985. "Searching for Leviathan: An Empirical Study," American Economic Review, American Economic Association, vol. 75(4), pages 748-57, September.
  6. Oates, Wallace E., 1993. "Fiscal Decentralization and Economic Development," National Tax Journal, National Tax Association, vol. 46(2), pages 237-43, June.
  7. Bird, Richard M., 1993. "Threading the Fiscal Labyrinth: Some Issues in Fiscal Decentralization," National Tax Journal, National Tax Association, vol. 46(2), pages 207-27, June.
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