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

  • Hammond, George W.

    ()

    (West Virginia University)

  • Tosun, Mehmet S.

    ()

    (University of Nevada, Reno)

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.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4574.

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Length: 35 pages
Date of creation: Nov 2009
Date of revision:
Publication status: published in: Journal of Regional Science, 2010, 20 (10), 1-18
Handle: RePEc:iza:izadps:dp4574
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  1. Arzaghi, Mohammad & Henderson, J. Vernon, 2005. "Why countries are fiscally decentralizing," Journal of Public Economics, Elsevier, vol. 89(7), pages 1157-1189, July.
  2. Mark D. Partridge & Dan S. Rickman & Kamar Ali & M. Rose Olfert, 2008. "Lost in space: population growth in the American hinterlands and small cities," Journal of Economic Geography, Oxford University Press, vol. 8(6), pages 727-757, November.
  3. Steven C. Deller & Tsung-Hsiu (Sue) Tsai & David W. Marcouiller & Donald B.K. English, 2001. "The Role of Amenities and Quality of Life In Rural Economic Growth," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(2), pages 352-365.
  4. Tao Zhang & Heng-fu Zou, 2001. "Fiscal decentralization, public spending, and economic growth in China," CEMA Working Papers 58, China Economics and Management Academy, Central University of Finance and Economics.
  5. McGranahan, David A., 1999. "Natural Amenities Drive Rural Population Change," Agricultural Economics Reports 33955, United States Department of Agriculture, Economic Research Service.
  6. Davoodi, Hamid & Zou, Heng-fu, 1998. "Fiscal Decentralization and Economic Growth: A Cross-Country Study," Journal of Urban Economics, Elsevier, vol. 43(2), pages 244-257, March.
  7. Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
  8. Jan K. Brueckner, 2005. "Fiscal Federalism and Economic Growth," CESifo Working Paper Series 1601, CESifo Group Munich.
  9. Jorge Martinez-Vazquez & Robert McNab, 2001. "Fiscal Decentralization and Economic Growth," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0101, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  10. Santiago M. Pinto, 2007. "Tax Competition In The Presence Of Interjurisdictional Externalities: The Case Of Crime Prevention," Journal of Regional Science, Wiley Blackwell, vol. 47(5), pages 897-913.
  11. Roback, Jennifer, 1982. "Wages, Rents, and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1257-78, December.
  12. Glaeser, E.L. & Scheinkman, J.A., 1993. "Economic Growth in a Cross-Section of Cities," Harvard Institute of Economic Research Working Papers 1645, Harvard - Institute of Economic Research.
  13. Akai, Nobuo & Sakata, Masayo, 2002. "Fiscal decentralization contributes to economic growth: evidence from state-level cross-section data for the United States," Journal of Urban Economics, Elsevier, vol. 52(1), pages 93-108, July.
  14. George W. Hammond & Eric Thompson, 2006. "Determinants of Income Growth in U.S. Metropolitan and Non-metropolitan Labor Markets," Working Papers 06-12 Classification- JEL, Department of Economics, West Virginia University.
  15. Matthew J. Higgins & Daniel Levy & Andrew T. Young, 2006. "Growth and Convergence across the United States: Evidence from County-Level Data," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 671-681, November.
  16. Geoffrey Turnbull & Gyusuck Geon, 2006. "Local government internal structure, external constraints and the median voter," Public Choice, Springer, vol. 129(3), pages 487-506, December.
  17. Oates, Wallace E., 2008. "On The Evolution of Fiscal Federalism: Theory and Institutions," National Tax Journal, National Tax Association, vol. 61(2), pages 313-34, June.
  18. Beeson, Patricia E. & DeJong, David N. & Troesken, Werner, 2001. "Population growth in U.S. counties, 1840-1990," Regional Science and Urban Economics, Elsevier, vol. 31(6), pages 669-699, November.
  19. Danyang Xie & Heng-fu Zou & Hamid Davoodi, 1999. "Fiscal Decentralization and Economic Growth in the United States," CEMA Working Papers 109, China Economics and Management Academy, Central University of Finance and Economics.
  20. Panizza, Ugo, 1999. "On the determinants of fiscal centralization: Theory and evidence," Journal of Public Economics, Elsevier, vol. 74(1), pages 97-139, October.
  21. George W. Hammond & Eric C. Thompson, 2008. "Determinants of Income Growth in Metropolitan and Nonmetropolitan Labor Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(3), pages 783-793.
  22. Sergio Rey & Brett Montouri, 1999. "US Regional Income Convergence: A Spatial Econometric Perspective," Regional Studies, Taylor & Francis Journals, vol. 33(2), pages 143-156.
  23. Oates, Wallace E., 1993. "Fiscal Decentralization and Economic Development," National Tax Journal, National Tax Association, vol. 46(2), pages 237-43, June.
  24. Linda Lobao & David S. Kraybill, 2005. "The Emerging Roles of County Governments in Metropolitan and Nonmetropolitan Areas: Findings From a National Survey," Economic Development Quarterly, , vol. 19(3), pages 245-259, August.
  25. Brueckner, Jan K, 1999. " Fiscal Federalism and Capital Accumulation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 1(2), pages 205-24.
  26. Thomas Garrett & Gary Wagner & David Wheelock, 2007. "Regional disparities in the spatial correlation of state income growth, 1977–2002," The Annals of Regional Science, Springer, vol. 41(3), pages 601-618, September.
  27. Zax, Jeffrey S, 1989. "Is There a Leviathan in Your Neighborhood?," American Economic Review, American Economic Association, vol. 79(3), pages 560-67, June.
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