Fiscal Decentralization and Economic Growth in OECD Countries

By T. Baskaran, Lars P. Feld. Social Science Research Network, 2013

147 citations recorded by the source corpus.

We study the effect of fiscal decentralization on economic growth for twenty-three Organisation for Economic Co-operation and Development countries from 1975 to 2008. In order to proxy fiscal decentralization, we use both traditional Government Finance Statistics (GFS)–style measures and new measures that account for the degree of subnational tax autonomy. The regressions with GFS–style measures indicate that fiscal decentralization has a negative but statistically insignificant effect on growth. Regressions with the new measures also result in negative coefficient estimates. However, they are larger in absolute terms and statistically significant. For the empirical literature on fiscal federalism, these results imply that measures of fiscal decentralization that account for subnational tax autonomy should be preferred to traditional GFS-style measures. From a policy perspective, we conclude that policy makers should be aware of the economic trade-offs when pursuing reforms toward more fiscal decentralization.

Subfields: Accounting, Economics and Econometrics, Political Science and International Relations

View Paper: https://www.semanticscholar.org/paper/d54fd0917a04c65c30ba33d70fdc4a98a4d7673a

Citations in the corpus

• Economic Growth and Judicial Independence, a Dozen Years on: Cross-Country Evidence Using an Updated Set of Indicators (2015, unknown): “Studies following in the footsteps of Persson and Tabellini inquire into the effects of federalism (Feld et al. 2005; Voigt and Blume 2012; Baskaran and Feld 2013; Asatryan and Feld 2013) or of direct democracy (Feld and Savioz 1997; Blume et al. 2009).”