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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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  • Asatryan, Zareh & Feld, Lars P., 2013. "Revisiting the link between growth and federalism: A Bayesian model averaging approach," ZEW Discussion Papers 13-049, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  • Handle: RePEc:zbw:zewdip:13049
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    Citations

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    Cited by:

    1. repec:rom:mrpase:v:9:y:2017:i:2:p:47-66 is not listed on IDEAS
    2. 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.
    3. 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, July.
    4. Thushyanthan Baskaran & Lars P. Feld & Sarah Necker, 2017. "Depressing dependence? Transfers and economic growth in the German states, 1975–2005," Regional Studies, Taylor & Francis Journals, vol. 51(12), pages 1815-1825, December.
    5. repec:aka:aoecon:v:67:y:2017:i:3:p:389-412 is not listed on IDEAS
    6. 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.
    7. 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.
    8. Bartolini, David & Ninka, Eniel & Santolini, Raffaella, 2017. "Tax Decentralisation, Labour productivity and Employment," MPRA Paper 81070, University Library of Munich, Germany.

    More about this item

    Keywords

    Fiscal Federalism; Economic Growth; Bayesian Model Averaging;

    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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