Fiscal Decentralization and Economic Growth

Martinez-Vazquez, Jorge; McNab, Robert Martin

doi:10.2139/ssrn.259281

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Fiscal Decentralization and Economic Growth

Georgia State Andrew Young School of Policy (ISP) Working Paper No. 01-01

38 Pages Posted: 15 Feb 2001

See all articles by Jorge Martinez-Vazquez

Jorge Martinez-Vazquez

Georgia State University - Andrew Young School of Policy Studies

Robert Martin McNab

Naval Postgraduate School

Date Written: January 2001

Abstract

This paper reviews the current knowledge on an issue of increasing policy interest: what impact fiscal decentralization has on economic growth. Fiscal decentralization may indeed have a direct impact on economic growth but the theoretical underpinnings for this relationship remain largely undeveloped. The absence of an adequate theoretical framework has undermined the validity of the empirical work on this subject. A fair summary of the empirical search for a direct relationship between fiscal decentralization and economic growth is that it remains an open question. Much less attention has been devoted in the literature to the indirect channels through which fiscal decentralization may affect economic growth, through the impact of fiscal decentralization on economic efficiency, the regional distribution of resources, and macroeconomic stability. This paper explorers the nature of these links and concludes with some thoughts and policy advice.

Keywords: Fiscal Decentralization, Economic Growth

JEL Classification: E62, H77

Suggested Citation: Suggested Citation

Martinez-Vazquez, Jorge and McNab, Robert Martin, Fiscal Decentralization and Economic Growth (January 2001). Georgia State Andrew Young School of Policy (ISP) Working Paper No. 01-01, Available at SSRN: https://ssrn.com/abstract=259281 or http://dx.doi.org/10.2139/ssrn.259281