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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 for the Study of Labor (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. 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.
    5. Patrick, Carlianne, 2016. "Jobless capital? The role of capital subsidies," Regional Science and Urban Economics, Elsevier, vol. 60(C), pages 169-179.
    6. 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.
    7. 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.
    8. 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.
    9. Tiwari, Smriti, 2017. "Does Local Development Influence Outmigration Decisions? Evidence from Indonesia," World Development, Elsevier, vol. 93(C), pages 108-124.
    10. 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.
    11. 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.
    12. 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.
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    16. repec:bla:jregsc:v:56:y:2016:i:5:p:733-753 is not listed on IDEAS
    17. 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.
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    More about this item

    Keywords

    employment; population; nonmetropolitan; metropolitan; fiscal decentralization; income; spatial econometrics;

    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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