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Fiscal Decentralization and Economic Growth in the United States

Author

Listed:
  • Danyang Xie

    (Hong Kong University of Science and Technology)

  • Heng-fu Zou

    (Institute for Advanced Studies, Wuhan University
    Development Research Group, World Bank)

  • Hamid Davoodi

    (International Monetary Fund)

Abstract

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.

Suggested Citation

  • Danyang Xie & Heng-fu Zou & Hamid Davoodi, 1999. "Fiscal Decentralization and Economic Growth in the United States," CEMA Working Papers 109, China Economics and Management Academy, Central University of Finance and Economics.
    • Handle: RePEc:cuf:wpaper:109
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    References listed on IDEAS

    as
    1. Wallace E. Oates & Wallace E. Oates, 2004. "Fiscal Decentralization and Economic Development," Chapters, in: Environmental Policy and Fiscal Federalism, chapter 21, pages 377-383, Edward Elgar Publishing.
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    Full references (including those not matched with items on IDEAS)

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    JEL classification:

    • B12 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Classical (includes Adam Smith)
    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

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