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Fiscal Decentralization and Economic Growth: A Cross-Country Study

  • Hamid Davoodi

    (Policy Research Department, The World Bank)

  • Heng-fu Zou

    (Policy Research Department, The World Bank
    Institute of Advanced Studies, Wuhan University)

We use a panel data set of 46 countries over the 1970¨C1989 period to investigate the relationship between fiscal decentralization and economic growth. We find a negative relationship between fiscal decentralization and growth in developing countries, but none in developed countries. Several explanations are offered for our findings.

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Paper provided by China Economics and Management Academy, Central University of Finance and Economics in its series CEMA Working Papers with number 98.

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Length: 14 pages
Date of creation: 1996
Date of revision:
Publication status: Published in Journal of Urban Economics, Volume 43, Issue 2, March 1998, Pages 244-257
Handle: RePEc:cuf:wpaper:98
Contact details of provider: Web page: http://cema.cufe.edu.cn/

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  1. Heng-fu Zou, 1994. "Taxes, Federal Grants, Local Public Spending, and Growth," CEMA Working Papers 78, China Economics and Management Academy, Central University of Finance and Economics.
  2. Heng-fu Zou, 1995. "Dynamic Effects of Federal Grants on Local Spending," CEMA Working Papers 93, China Economics and Management Academy, Central University of Finance and Economics.
  3. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
  4. Robert J. Barro, 1988. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
  5. Bird, Richard & Wallich, Christine, 1993. "Fiscal decentralization and intergovernmental relations in transition economics : toward a systematic framework of analysis," Policy Research Working Paper Series 1122, The World Bank.
  6. Oates, Wallace E., 1993. "Fiscal Decentralization and Economic Development," National Tax Journal, National Tax Association, vol. 46(2), pages 237-43, June.
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