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The Fiscal Decentralisation and Economic Growth Nexus Revisited

The Fiscal Decentralisation and Economic Growth Nexus Revisited This paper addresses two challenges that the fiscal decentralisation and economic growth nexus faces – namely, endogeneity problems and inaccurate measurement of fiscal decentralisation. We introduce novel instrumental variables based on common legal system origin, common federal system, geographical position and relative country size. The positive relationship between fiscal decentralisation and economic growth that we find remains valid when using these instrumental variables. Using fiscal decentralisation measures that better reflect the autonomy of subnational governments changes this relationship. This finding, however, is the result of the accompanying changes in the sample rather than the use of these alternative measures themselves. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Fiscal Studies Wiley

The Fiscal Decentralisation and Economic Growth Nexus Revisited

Fiscal Studies , Volume 38 (1) – Mar 1, 2017

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References (33)

Publisher
Wiley
Copyright
Fiscal Studies © 2017 Institute for Fiscal Studies
ISSN
0143-5671
eISSN
1475-5890
DOI
10.1111/1475-5890.12099
Publisher site
See Article on Publisher Site

Abstract

This paper addresses two challenges that the fiscal decentralisation and economic growth nexus faces – namely, endogeneity problems and inaccurate measurement of fiscal decentralisation. We introduce novel instrumental variables based on common legal system origin, common federal system, geographical position and relative country size. The positive relationship between fiscal decentralisation and economic growth that we find remains valid when using these instrumental variables. Using fiscal decentralisation measures that better reflect the autonomy of subnational governments changes this relationship. This finding, however, is the result of the accompanying changes in the sample rather than the use of these alternative measures themselves.

Journal

Fiscal StudiesWiley

Published: Mar 1, 2017

Keywords: ; ; ; ; ; ;

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