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Fiscal Federalism in Western European and Selected Other Countries: Centralization or Decentralization? What Is Better for Economic Growth?

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  • Ulrich Thießen

Abstract

Das Papier gibt zunächst einen Überblick über die theoretischen Argumente für und gegen fiskalische Dezentralisierung. Für westeuropäische Länder sowie ausgewählte weitere Länder mit mittlerem Einkommensniveau wird dann eine empirische Analyse des Zusammenhangs zwischen Indikatoren des fiskalischen Dezentralisierungsgrades und dem wirtschaftlichen Wachstum durchgeführt. Als abhängige Variable in den Regressionen wird aber nicht nur das Wirtschaftswachstum berücksichtigt, sondern auch zwei Komponenten des Wirtschaftswachstums, nämlich Kapitalbildung und Wachstum der totalen Faktorproduktivität. Die Ergebnisse sind, daß für Länder mit hohem Einkommen und westeuropäische Länder kein linearer Zusammenhang zwischen Wirtschaftswachstum und seinen Komponenten -auf der einen Seite- und fiskalischer Dezentralisierung -auf der anderen Seite- zu bestehen scheint. Vielmehr scheint dieser Zusammenhang "glockenförmig" zu sein. Dagegen gilt für die Länder mit relativ niedrigem Einkommensniveau der Stichprobe (dies sind Länder mit mittlerem Einkommensniveau nach der Klassifizierung der Weltbank), daß zunehmende fiskalische Dezentralisierung mit steigendem pro-Kopf Wirtschafswachstum und höherer Kapitalbildung verbunden ist. Following a brief review of the theoretical literature on the benefits and shortcomings of fiscal decentralization this paper presents an empirical analysis of the relationship between per capita economic growth and its production function determinants, on the one hand, and constructed indicators of fiscal decentralization, on the other hand. The analysis suggests for high income countries, in particular Western European countries, a hump-shaped relation between per capita economic growth and capital formation, on the one hand, and fiscal decentralization, on the other hand. By contrast, for countries with middle income, the association between fiscal decentralization and economic growth and its determinants (capital formation and total factor productivity growth) becomes stronger as fiscal decentralization increases.

Suggested Citation

  • Ulrich Thießen, 2000. "Fiscal Federalism in Western European and Selected Other Countries: Centralization or Decentralization? What Is Better for Economic Growth?," Discussion Papers of DIW Berlin 224, DIW Berlin, German Institute for Economic Research.
  • Handle: RePEc:diw:diwwpp:dp224
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    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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