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

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Listed author(s):
  • 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
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. Zareh Asatryan & Lars Feld & Benny Geys, 2015. "Partial fiscal decentralization and sub-national government fiscal discipline: empirical evidence from OECD countries," Public Choice, Springer, vol. 163(3), pages 307-320, June.
  2. Thushyanthan Baskaran & Lars P. Feld & Jan Schnellenbach, 2016. "Fiscal Federalism, Decentralization, And Economic Growth: A Meta-Analysis," Economic Inquiry, Western Economic Association International, vol. 54(3), pages 1445-1463, 07.
  3. Thushyanthan Baskaran & Lars P. Feld & Sarah Necker, 2016. "Depressing Dependence? Transfers and Economic Growth in the German States, 1975-2005," CESifo Working Paper Series 6055, CESifo Group Munich.
  4. Steel, Mark F. J., 2017. "Model Averaging and its Use in Economics," MPRA Paper 81568, University Library of Munich, Germany.
  5. Voigt, Stefan & Gutmann, Jerg & Feld, Lars P., 2015. "Economic growth and judicial independence, a dozen years on: Cross-country evidence using an updated Set of indicators," European Journal of Political Economy, Elsevier, vol. 38(C), pages 197-211.
  6. 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.
  7. Bartolini, David & Ninka, Eniel & Santolini, Raffaella, 2017. "Tax Decentralisation, Labour productivity and Employment," MPRA Paper 81070, University Library of Munich, Germany.

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