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The Economic Effects of Federalism and Decentralization – A Cross-Country Assessment

Author

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  • Stefan Voigt

    (Philipps-University Marburg)

  • Lorenz Blume

    (Department of Economics, Universitaet Kassel)

Abstract

This paper is based on the conjecture that institutional details matter and that attempts to estimate the economic effects of federalism by drawing on a simple dummy variable neglect potentially important institutional details. Based on a principal component analysis, seven aspects of both federalism and decentralization are used as variables for explaining differences in (1) fiscal policy, (2) government effectiveness, (3) economic productivity, and (4) happiness. The results show that institutional details do, indeed, matter. Different aspects of federalism impact on the outcome variables in different degrees. This study adds to our knowledge on the transmission mechanisms of federalism and decentralization.

Suggested Citation

  • Stefan Voigt & Lorenz Blume, 2009. "The Economic Effects of Federalism and Decentralization – A Cross-Country Assessment," MAGKS Papers on Economics 200905, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  • Handle: RePEc:mar:magkse:200905
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    More about this item

    Keywords

    Federalism; Federalism; decentralization; Fiscal federalism; Economic Effects of constitutions; constitutional economics.;
    All these keywords.

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government

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