FISCAL FEDERALISM,DECENTRALIZATION, AND ECONOMIC GROWTH: A META‐ANALYSIS |
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| Authors: | Thushyanthan Baskaran Lars P. Feld Jan Schnellenbach |
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| Affiliation: | 1. +49‐1759‐959239+49‐(0)271‐7402732;2. Professor of Applied Microeconomics, Department of Economics, University of Siegen, Siegen, Germany;3. +49‐(0)761‐790970+49‐(0)761‐7909797;4. Professor of Economic Policy and Constitutional Economics, and Director, Walter Eucken Institut, University of Freiburg, Freiburg, Germany |
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| Abstract: | The theoretical literature on fiscal federalism has identified several channels through which government decentralization could affect economic growth. Much of the literature focuses on the efficiency aspects of a decentralized provision of public services, but decentralization may also increase growth by raising the ability of the political system to innovate and carry out reforms. In contrast, some authors argue that decentralization increases corruption and government inefficiency, and thus may diminish growth. Given this theoretical ambiguity, several studies have attempted to identify the effect of decentralization on economic growth empirically over the last two decades. We review and conduct a meta‐analysis of this empirical literature. Based on our analysis, we point out open questions and discuss possible ways to answer them. (JEL H77, O43, C52) |
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