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Does fiscal decentralization result in a better business climate?

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  • Russell S. Sobel
  • Nabamita Dutta
  • Sanjukta Roy

Abstract

Previous literature generally finds that greater fiscal decentralization is associated with faster economic growth, improved government performance and stronger constraints on the Leviathan behaviour of governments. Because economic growth critically depends on the presence of good government policies and institutions, the likely but untested link between these strands of literature is that greater decentralization probably improves growth because it results in government policies more conducive to entrepreneurship and business success. We test (and confirm) this hypothesis using several business climate measures for the US states.

Suggested Citation

  • Russell S. Sobel & Nabamita Dutta & Sanjukta Roy, 2013. "Does fiscal decentralization result in a better business climate?," Applied Economics Letters, Taylor & Francis Journals, vol. 20(1), pages 84-91, January.
    • Handle: RePEc:taf:apeclt:v:20:y:2013:i:1:p:84-91
    DOI: 10.1080/13504851.2012.657344
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    Cited by:

    1. Koomin Kim, 2023. "How gubernatorial budgetary power and interest groups affect vertical fiscal imbalances in the US states: Focusing on fiscal centralization and decentralization," Public Budgeting & Finance, Wiley Blackwell, vol. 43(2), pages 53-81, July.
    2. I. Shovkun, 2018. "Industrial development in decentralized conditions: experience of leading industrial countries and conclusions for Ukraine," Economy and Forecasting, Valeriy Heyets, issue 4, pages 38-64.
    3. Peter Calcagno & Frank Hefner, 2018. "Targeted Economic Incentives: An Analysis of State Fiscal Policy and Regulatory Conditions," The Review of Regional Studies, Southern Regional Science Association, vol. 48(1), pages 71-91, Spring.
    4. Jorge Martinez-Vazquez & Santiago Lago-Peñas & Agnese Sacchi, 2017. "The Impact Of Fiscal Decentralization: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 31(4), pages 1095-1129, September.
    5. Monica Escaleras & Peter T. Calcagno, 2018. "Does Fiscal Decentralization Affect Infrastructure Quality? An Examination Of U.S. States," Contemporary Economic Policy, Western Economic Association International, vol. 36(2), pages 410-422, April.
    6. Escaleras, Monica & Chiang, Eric P., 2017. "Fiscal decentralization and institutional quality on the business environment," Economics Letters, Elsevier, vol. 159(C), pages 161-163.
    7. Burret, Heiko T. & Feld, Lars P. & Schaltegger, Christoph A., 2022. "Fiscal federalism and economic performance new evidence from Switzerland," European Journal of Political Economy, Elsevier, vol. 74(C).
    8. Bibek Adhikari & Saroj Dhital, 2021. "Decentralization and regional convergence: Evidence from night‐time lights data," Economic Inquiry, Western Economic Association International, vol. 59(3), pages 1066-1088, July.
    9. Qing Miao & Yu Shi & Meri Davlasheridze, 2021. "Fiscal Decentralization and Natural Disaster Mitigation: Evidence from the United States," Public Budgeting & Finance, Wiley Blackwell, vol. 41(1), pages 26-50, March.

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