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Revisiting the link between growth and federalism: A Bayesian model averaging approach

  • Asatryan, Zareh
  • Feld, Lars P.

Following the ambiguous results in the literature aimed at understanding the empirical link between fiscal federalism and economic growth, this paper revisits the question using a Bayesian Model Averaging approach. The analysis suggests that the failure to appropriately account for model uncertainty may have previously led to biased estimates. The results from a sample of 23 OECD countries over 1975-2000 indicate that after controlling for unobserved country heterogeneity, there is no robust link, neither positive, nor negative, between output growth and fiscal federalism (measured as sub-national governments' share of own source tax revenue).

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 13-049.

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Date of creation: 2013
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Handle: RePEc:zbw:zewdip:13049
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