Fiscal Decentralization and Economic Growth
Georgia State Andrew Young School of Policy (ISP) Working Paper No. 01-01
38 Pages Posted: 15 Feb 2001
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
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