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Fiscal Decentralization and Economic Growth: Evidence from Regional-Level Panel Data for Colombia

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  • Luis Ignacio Lozano-Espitia

    ()

  • Juan Manuel Julio-Román

    ()

Abstract

This paper provides evidence on the positive role of fiscal decentralization on regional economic growth in Colombia since the promulgation of the Political Constitution of 1991. The empirical strategy involved the choice of a suitable estimator for the panel data approach, the Augmented Mean Group Estimator, which allows adding unobserved determinants suggested by literature to traditional long term explanatory factors. The strategy was complemented with exercises that helped us to support the results coming from (i) cross-section models for different periods and various control variables, (ii) test on the complementarity hypothesis between public goods provided by different jurisdictions (spillover effects), and (iii) an assessment of unconditional convergence in regional income differences.

Suggested Citation

  • Luis Ignacio Lozano-Espitia & Juan Manuel Julio-Román, 2015. "Fiscal Decentralization and Economic Growth: Evidence from Regional-Level Panel Data for Colombia," Borradores de Economia 865i, Banco de la Republica de Colombia.
  • Handle: RePEc:bdr:borrec:865i
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    References listed on IDEAS

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    2. Eberhardt, Markus & Teal, Francis, 2008. "Modeling technology and technological change in manufacturing: how do countries differ?," MPRA Paper 10690, University Library of Munich, Germany.
    3. Fisman, Raymond & Gatti, Roberta, 2002. "Decentralization and corruption: evidence across countries," Journal of Public Economics, Elsevier, vol. 83(3), pages 325-345, March.
    4. Dell’Erba Salvatore & Sola Sergio, 2016. "Does fiscal policy affect interest rates? Evidence from a factor-augmented panel," The B.E. Journal of Macroeconomics, De Gruyter, vol. 16(2), pages 395-437, June.
    5. Edgar Villa & Manuel Moscoso & Jorge A. Restrepo, 2012. "Crecimiento, Conflicto Armado y Crimen Organizado: Evidencia para Colombia," Vniversitas Económica 010010, Universidad Javeriana - Bogotá.
    6. Iimi, Atsushi, 2005. "Decentralization and economic growth revisited: an empirical note," Journal of Urban Economics, Elsevier, vol. 57(3), pages 449-461, May.
    7. Ignacio Lozano & María Adelaida Martínez, 2013. "Enrollment and quality levels of Colombia’s public basic education: Has fiscal decentralization improved them?," Borradores de Economia 747, Banco de la Republica de Colombia.
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    11. 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.
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    Cited by:

    1. Leonardo Bonilla-Mejía & Iván Higuera-Mendieta, 2017. "Political Alignment in the Time of Weak Parties: Electoral Advantages and Subnational Transfers in Colombia," Documentos de Trabajo Sobre Economía Regional y Urbana 015746, Banco de la República - Economía Regional.

    More about this item

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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