Fiscal decentralisation and IDC economic growth: An empirical investigation

Woller, Gary M.; Phillips, Kerk L.

doi:10.1080/00220389808422532

Cited by 160 publications

(104 citation statements)

References 12 publications

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“…Davoodi and Zou (1998), Rodriguez-Pose and Ezcurra (2010), Bodman (2011), Baskaran and Feld (2013) are among those authors who provide evidence for a negative relation between federalism and growth, while Yilmaz (2000), Iimi (2005) report opposite results. Woller and Phillips (1998), Thornton (2007) do not find such a robust direct link. Thiessen (2003) tries to link these results together by arguing that the relation is inverse-U shaped, while Enikolopov and Zhuravskaya (2007) maintain that fiscal federalism can potentially enhance growth, but only conditional on good institutions.…”

Section: Introductionmentioning

confidence: 96%

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

Asatryan

Feld

2015

Journal of Comparative Economics

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Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. Non-technical SummaryIn the classic case fiscal federalism leads to economic growth by a more productive and possibly smaller public sector through higher preference homogeneity and enhanced intergovernmental competition. On the other hand, decentralized political decisions create inter-jurisdictional spillovers which may negatively affect growth by distorting local tax and fiscal incentives. In recent years, this discussion has led to a growing body of literature aimed at understanding the empirical link between the two phenomena. The results on the existence, direction or sign of such a link, however, are as ambiguous as ever.The present paper takes a fresh look at the empirical relationship between fiscal federalism and output growth using a Bayesian model averaging approach. This approach is increasingly becoming a standard econometric tool in the empirical growth literature, because it offers a coherent procedure to deal with both model and parameter uncertainty in a context of weak theoretical guidance which has previously led researchers to choose their empirical specifications (explanatory variables and functional forms) on an arbitrary basis, or at best using some unknown rule-of-thumb rules. Surprisingly, however, the earlier literature on the link between growth and federalism -by definition being a part of this much larger literature on the determinants of economic growth and, thus, sharing the same methodological limitations -has never adopted these advancements.Obviously, endogeneity and causality are the main concerns of these studies, but the methodological superiority of the present analysis allows for claiming that the results of previous research might have been additionally biased due to over restrictive model specification. In contrast, the results from a sample of 23 OECD countries over indicate that after controlling for unobserved country heterogeneity, there is no robust link, neither positive, nor negative, between output growth and fiscal federalism. Das Wichtigste in Kürze

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Section: Introductionmentioning

confidence: 96%

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

Asatryan

Feld

2015

Journal of Comparative Economics

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“…More specifically, a 1 Davoodi and Zou (1998) and Zhang and Zou (1998) find evidence of a negative relationship between fiscal decentralization and economic growth, whereas Thiessen (2003) and Iimi (2005) show that fiscal decentralization enhances economic growth. Others do not find a significant relationship (Woller and Phillips, 1998;Thornton, 2007).…”

Section: Introductionmentioning

confidence: 97%

In Government We Trust: The Role of Fiscal Decentralization

2011

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“…In other words, the interpretation of the empirical evidence of the relation between economic performance and spatial disparities is that -if not wholly driven by the business cycle -the evolution of regional disparities is strongly related to national economic performance, rather than the result of any 'economic dividend' of devolution. This analysis is based upon our chosen proxy for decentralisation which, while commonly used in the literature (Oates, 1985;Woller and Phillips, 1998;Akai and Sakata, 2002), is -as we have acknowledged -not without its weaknesses (Martinez-Vazquez and Timofeev 2009). The direction of causality will, however, require further investigation and cross-national comparative study.…”

Section: An 'Economic Dividend' Of Devolution In the Uk?mentioning

confidence: 99%

In Search of the ‘Economic Dividend’ of Devolution: Spatial Disparities, Spatial Economic Policy, and Decentralisation in the UK

Pike

Rodríguez‐Pose

Tomaney

et al. 2012

Environ Plann C Gov Policy

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After a decade of devolution and amid uncertainties about its effects, it is timely to assess and reflect upon the evidence and enduring meaning of any 'economic dividend' of devolution in the UK. Taking a multi-disciplinary approach utilising institutionalist and quantitative methods, this paper seeks to discern the nature and extent of any 'economic dividend' through a conceptual and empirical analysis of the relationships between spatial disparities, spatial economic policy and decentralisation. Situating the UK experience within the historical context of its evolving geographical political economy, we find: i) a varied and uneven nature of the relationships between regional disparities, spatial economic policy and decentralisation that change direction during specific time periods; ii) the role of national economic growth is pivotal in explaining spatial disparities and the nature and extent of their relationship with the particular forms of spatial economic policy and decentralisation deployed; and, iii) there is limited evidence that any 'economic dividend' of devolution has emerged but this remains difficult to discern because its likely effects are over-ridden by the role of national economic growth in decisively shaping the pattern of spatial disparities and in determining the scope and effects of spatial economic policy and decentralisation.

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Fiscal decentralisation and IDC economic growth: An empirical investigation

Cited by 160 publications

References 12 publications

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

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

In Government We Trust: The Role of Fiscal Decentralization

In Search of the ‘Economic Dividend’ of Devolution: Spatial Disparities, Spatial Economic Policy, and Decentralisation in the UK

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