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

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  • Asatryan, Zareh
  • Feld, Lars P.

Abstract

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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Keywords: Fiscal Federalism; Economic Growth; Bayesian Model Averaging;

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Find related papers by JEL classification:
  • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
  • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
  • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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Cited by:

  1. Stefan Voigt & Jerg Gutmann & Lars P. Feld, 2014. "Economic Growth and Judicial Independence, a Dozen Years On: Cross-Country Evidence Using an Updated Set of Indicators," CESifo Working Paper Series 5010, CESifo Group Munich.
  2. Thushyanthan Baskaran & Lars P. Feld & Jan Schnellenbach, 2014. "Fiscal Federalism, Decentralization and Economic Growth: Survey and Meta-Analysis," CESifo Working Paper Series 4985, CESifo Group Munich.

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