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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. Martinez-Vazquez, Jorge & McNab, Robert M., 2003. "Fiscal Decentralization and Economic Growth," World Development, Elsevier, vol. 31(9), pages 1597-1616, September.
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  3. 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.
  4. Robert J. Barro, 1988. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
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  10. 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.
  11. 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.
  12. 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, W.E. Upjohn Institute for Employment Research, vol. 19(3), pages 245-259, August.
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  14. Oates, Wallace E., 1993. "Fiscal Decentralization and Economic Development," National Tax Journal, National Tax Association, vol. 46(2), pages 237-43, June.
  15. 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.
  16. 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.
  17. 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.
  18. 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.
  19. 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.
  20. Mark D. Partridge & Dan S. Rickman & Kamar Ali & M. Rose Olfert, 2007. "Lost in Space: Population Dynamics in the American Hinterlands and Small Cities," Economics Working Paper Series 0707, Oklahoma State University, Department of Economics and Legal Studies in Business.
  21. Xie, Danyang & Zou, Heng-fu & Davoodi, Hamid, 1999. "Fiscal Decentralization and Economic Growth in the United States," Journal of Urban Economics, Elsevier, vol. 45(2), pages 228-239, March.
  22. Panizza, Ugo, 1999. "On the determinants of fiscal centralization: Theory and evidence," Journal of Public Economics, Elsevier, vol. 74(1), pages 97-139, October.
  23. 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.
  24. Sergio Rey & Brett Montouri, 1999. "US Regional Income Convergence: A Spatial Econometric Perspective," Regional Studies, Taylor & Francis Journals, vol. 33(2), pages 143-156.
  25. Zax, Jeffrey S, 1989. "Is There a Leviathan in Your Neighborhood?," American Economic Review, American Economic Association, vol. 79(3), pages 560-67, June.
  26. McGranahan, David A., 1999. "Natural Amenities Drive Rural Population Change," Agricultural Economics Reports 33955, United States Department of Agriculture, Economic Research Service.
  27. 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.
  28. Arzaghi, Mohammad & Henderson, J. Vernon, 2005. "Why countries are fiscally decentralizing," Journal of Public Economics, Elsevier, vol. 89(7), pages 1157-1189, July.
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