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The Impact of Local Decentralization on Economic Growth: Evidence from U.S. Counties

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  • Hammond, George W.

    () (West Virginia University)

  • Tosun, Mehmet S.

    () (University of Nevada, Reno)

Abstract

We analyze the impact of fiscal decentralization on U.S. county population, employment, and real income growth. Our findings suggest that government organization matters for local economic growth, but that the impacts vary by government unit and by economic indicator. We find that single-purpose governments per square mile have a positive impact on metropolitan population and employment growth, but no significant impact on nonmetropolitan counties. In contrast, the fragmentation of general-purpose governments per capita has a negative impact on employment and population growth in nonmetropolitan counties. Our results suggest that local government decentralization matters differently for metropolitan and nonmetropolitan counties.

Suggested Citation

  • Hammond, George W. & Tosun, Mehmet S., 2009. "The Impact of Local Decentralization on Economic Growth: Evidence from U.S. Counties," IZA Discussion Papers 4574, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp4574
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    Cited by:

    1. Deller, Stephen & Schreiber, Andrew, 2012. "Mining and Community Economic Growth," The Review of Regional Studies, Southern Regional Science Association, vol. 42(2), pages 121-141, Summer.
    2. Anping Chen & Nicolaas Groenewold, 2013. "The national and regional effects of fiscal decentralisation in China," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 51(3), pages 731-760, December.
    3. Mark D. Partridge & M. Rose Olfert, 2011. "The Winners' Choice: Sustainable Economic Strategies for Successful 21st-Century Regions," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 33(2), pages 143-178.
    4. Christopher B Goodman, 2018. "Usage of Specialized Service Delivery: Evidence from Contiguous Counties," Publius: The Journal of Federalism, Oxford University Press, vol. 48(4), pages 686-708.
    5. 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.
    6. Patrick, Carlianne, 2016. "Jobless capital? The role of capital subsidies," Regional Science and Urban Economics, Elsevier, vol. 60(C), pages 169-179.
    7. Feder, Christophe & Kataishi, Rodrigo Ezequiel, 2017. "Decentralization in Heterogeneous Regions: A Biased Technological Change Approach," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201703, University of Turin.
    8. Rudiger Ahrend & Emily Farchy & Ioannis Kaplanis & Alexander C. Lembcke, 2015. "What Makes Cities More Productive? Agglomeration Economies and the Role of Urban Governance: Evidence from 5 OECD Countries," SERC Discussion Papers 0178, Spatial Economics Research Centre, LSE.
    9. Carlianne Patrick, 2014. "Does Increasing Available Non-Tax Economic Development Incentives Result in More Jobs?," National Tax Journal, National Tax Association;National Tax Journal, vol. 67(2), pages 351-386, June.
    10. K. L. Devkota, 2014. "Impact of Fiscal Decentralization on Economic Growth in the Districts of Nepal," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1420, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    11. Tiwari, Smriti, 2017. "Does Local Development Influence Outmigration Decisions? Evidence from Indonesia," World Development, Elsevier, vol. 93(C), pages 108-124.
    12. Rudiger Ahrend & Emily Farchy & Ioannis Kaplanis & Alexander C. Lembcke, 2017. "What Makes Cities More Productive? Evidence From Five Oecd Countries On The Role Of Urban Governance," Journal of Regional Science, Wiley Blackwell, vol. 57(3), pages 385-410, June.
    13. Amanda Ross & Kaitlyn Wolf, 2014. "Do Market-Based Tax Incentives Attract New Businesses? Evidence from the New Markets Tax Credit," ERSA conference papers ersa14p653, European Regional Science Association.
    14. Ahrend, Rudiger & Farchy, Emily & Kaplanis, Ioannis & Lembcke, Alexander C., 2016. "What Makes Cities More Productive? Evidence from 5 OECD Countries on the Role of Urban Governance," Beiträge zur Jahrestagung 2016 (Witten/Herdecke) 175187, Verein für Socialpolitik, Ausschuss für Wirtschaftssysteme und Institutionenökonomik.
    15. Dean Stansel, 2012. "Competition, knowledge, and local government," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 25(3), pages 243-253, September.
    16. Licia Ferranna & Margherita Gerolimetto & Stefano Magrini, 2016. "Urban Governance Structure and Wage Disparities across US Metropolitan Areas," Working Papers 2016:26, Department of Economics, University of Venice "Ca' Foscari".
    17. , Aisdl, 2021. "Factors Determining the Development of Minimum Comparable Areas and Spatial Interaction," OSF Preprints 9e7xz, Center for Open Science.
    18. Zelda Brutti, 2016. "Cities drifting apart: Heterogeneous outcomes of decentralizing public education," Working Papers 2016/26, Institut d'Economia de Barcelona (IEB).
    19. Goodman, Christopher B, 2019. "Political Fragmentation & Economic Growth in U.S. Metropolitan Areas," SocArXiv dx75m, Center for Open Science.
    20. Qasim Raza & Hafsa Hina, 2016. "Fiscal Decentralisation, Provincial Economic Growth and Spillover Effects: A Spatial Panel Data Analysis," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 55(4), pages 743-760.
    21. Kaitlyn Harger & Amanda Ross, 2016. "Do Capital Tax Incentives Attract New Businesses? Evidence Across Industries From The New Markets Tax Credit," Journal of Regional Science, Wiley Blackwell, vol. 56(5), pages 733-753, November.
    22. Mark D. Partridge & Dan S. Rickman, 2012. "Integrating Regional Economic Development Analysis and Land Use Economics," Economics Working Paper Series 1203, Oklahoma State University, Department of Economics and Legal Studies in Business.

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    More about this item

    Keywords

    employment; population; nonmetropolitan; metropolitan; fiscal decentralization; income; spatial econometrics;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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