The Economic Effects of Federalism and Decentralization - A Cross-Country Assessment

37 Pages Posted: 26 Nov 2008 Last revised: 10 Sep 2009

See all articles by Stefan Voigt

Stefan Voigt

University of Hamburg - Institute of Law & Economics; CESifo (Center for Economic Studies and Ifo Institute)

Lorenz Blume

Phillips University Marburg

Date Written: August 2009

Abstract

This paper is based on the conjecture that institutional details matter and that attempts to estimate the economic effects of federalism by drawing on a simple dummy variable neglect potentially important institutional details. Based on a principal component analysis, seven aspects of both federalism and decentralization are used as variables for explaining differences in (1) fiscal policy, (2) government effectiveness, (3) economic productivity, and (4) happiness. The results show that institutional details do, indeed, matter. Different aspects of federalism impact on the outcome variables in different degrees. This study adds to our knowledge on the transmission mechanisms of federalism and decentralization.

Keywords: Federalism, decentralization, Fiscal federalism, Economic Effects of constitutions, constitutional economics

JEL Classification: H71, H11

Suggested Citation

Voigt, Stefan and Blume, Lorenz, The Economic Effects of Federalism and Decentralization - A Cross-Country Assessment (August 2009). CESifo Working Paper Series No. 2766, Available at SSRN: https://ssrn.com/abstract=1307169

Stefan Voigt (Contact Author)

University of Hamburg - Institute of Law & Economics ( email )

Johnsallee 35
Hamburg, 20148
Germany
+49-40-428385782 (Phone)
+49-40-428386794 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Lorenz Blume

Phillips University Marburg ( email )

Am Plan 2
Marburg, D-35037
Germany

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