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Fiscal Federalism, Decentralization and Economic Growth: Survey and Meta-Analysis

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  • Thushyanthan Baskaran
  • Lars P. Feld
  • Jan Schnellenbach

Abstract

The theoretical literature on the economics of fiscal federalism has identified several potential effects of government decentralization on economic growth. Much of the traditional literature focuses on the efficiency aspects of a decentralized provision of public services. However, decentralization may also increase growth by raising the ability of the political system to innovate and carry out reforms. On the contrary, some authors argue that decentralization increases corruption and government inefficiency. After a discussion of the theoretical arguments, we provide both a traditional survey and a meta-analysis of the empirical literature on decentralization and economic growth. Based on our survey, we identify open questions and discuss possible ways of answering them.

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  • Thushyanthan Baskaran & Lars P. Feld & Jan Schnellenbach, 2014. "Fiscal Federalism, Decentralization and Economic Growth: Survey and Meta-Analysis," CESifo Working Paper Series 4985, CESifo.
    • Handle: RePEc:ces:ceswps:_4985
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    4. Lars P. Feld & Jost H. Heckemeyer, 2011. "Fdi And Taxation: A Meta‐Study," Journal of Economic Surveys, Wiley Blackwell, vol. 25(2), pages 233-272, April.
    5. Asatryan, Zareh & Feld, Lars P., 2015. "Revisiting the link between growth and federalism: A Bayesian model averaging approach," Journal of Comparative Economics, Elsevier, vol. 43(3), pages 772-781.
    6. Peter Nijkamp & Jacques Poot, 2016. "Reply to “A Replication of “Meta-analysis of the Effect of Fiscal Policies on Long-run Growth†(European Journal of Political Economy 2004)â€," Public Finance Review, , vol. 44(3), pages 406-412, May.
    7. Bartolini, David & Ninka, Eniel & Santolini, Raffaella, 2017. "Tax Decentralisation, Labour productivity and Employment," MPRA Paper 81070, University Library of Munich, Germany.
    8. Pierre Salmon, 2013. "Decentralization and growth: what if the cross-jurisdiction approach had met a dead end?," Constitutional Political Economy, Springer, vol. 24(2), pages 87-107, June.
    9. Alfonso Mendoza‐Velázquez & Mónica Rubio‐García & Luis D. Conde‐Cortés, 2022. "Fiscal decentralization and regional economic growth: Evidence from Mexico since the 2000s," Public Budgeting & Finance, Wiley Blackwell, vol. 42(1), pages 45-65, March.
    10. Åsa Johansson, 2016. "Public Finance, Economic Growth and Inequality: A Survey of the Evidence," OECD Economics Department Working Papers 1346, OECD Publishing.
    11. Andrea Filippetti & Agnese Sacchi, 2016. "Decentralization and economic growth reconsidered: The role of regional authority," Environment and Planning C, , vol. 34(8), pages 1793-1824, December.
    12. Reingewertz, Yaniv, 2014. "Fiscal Decentralization - a Survey of the Empirical Literature," MPRA Paper 59889, University Library of Munich, Germany.
    13. Yushkov, Andrey, 2015. "Fiscal decentralization and regional economic growth: Theory, empirics, and the Russian experience," Russian Journal of Economics, Elsevier, vol. 1(4), pages 404-418.

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    Keywords

    fiscal federalism; fiscal competition; economic growth; meta-analysis;
    All these keywords.

    JEL classification:

    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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