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Fiscal Federalism and Economic Growth

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  • Jan K. Brueckner

Abstract

This paper uses an endogenous-growth model with overlapping generations to explore the connection between fiscal federalism and economic growth. The analysis shows that federalism, which allows public-good levels to be tailored to suit the differing demands of young and old consumers, who live in different jurisdictions, increases the incentive to save. This stronger incentive in turn leads to an increase in investment in human capital, and a byproduct of this higher investment is faster economic growth.

Suggested Citation

  • Jan K. Brueckner, 2005. "Fiscal Federalism and Economic Growth," CESifo Working Paper Series 1601, CESifo.
  • Handle: RePEc:ces:ceswps:_1601
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    References listed on IDEAS

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    3. Iimi, Atsushi, 2005. "Decentralization and economic growth revisited: an empirical note," Journal of Urban Economics, Elsevier, vol. 57(3), pages 449-461, May.
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    9. Paul W. Rhode & Koleman S. Strumpf, 2003. "Assessing the Importance of Tiebout Sorting: Local Heterogeneity from 1850 to 1990," American Economic Review, American Economic Association, vol. 93(5), pages 1648-1677, December.
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    More about this item

    Keywords

    fiscal federalism; overlapping generations; economic growth; human capital;
    All these keywords.

    JEL classification:

    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General

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