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Fiscal Decentralization and Economic Growth: A Cross-Country Study

Author

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  • Hamid Davoodi

    (Policy Research Department, The World Bank)

  • Heng-fu Zou

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

Abstract

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.

Suggested Citation

  • Hamid Davoodi & Heng-fu Zou, 1996. "Fiscal Decentralization and Economic Growth: A Cross-Country Study," CEMA Working Papers 98, China Economics and Management Academy, Central University of Finance and Economics.
  • Handle: RePEc:cuf:wpaper:98
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    References listed on IDEAS

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    1. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416-416.
    2. Zou Heng-fu, 1994. "Dynamic Effects of Federal Grants on Local Spending," Journal of Urban Economics, Elsevier, vol. 36(1), pages 98-115, July.
    3. Devarajan, Shantayanan & Swaroop, Vinaya & Heng-fu, Zou, 1996. "The composition of public expenditure and economic growth," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 313-344, April.
    4. Oates, Wallace E., 1993. "Fiscal Decentralization and Economic Development," National Tax Journal, National Tax Association, vol. 46(2), pages 237-43, June.
    5. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-963, September.
    6. Zou, Heng-fu, 1996. "Taxes, Federal Grants, Local Public Spending, and Growth," Journal of Urban Economics, Elsevier, vol. 39(3), pages 303-317, May.
    7. Oates, Wallace E., 1993. "Fiscal Decentralization and Economic Development," National Tax Journal, National Tax Association;National Tax Journal, vol. 46(2), pages 237-243, June.
    8. 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.
    9. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
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    More about this item

    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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