Fiscal Decentralization and Economic Growth in OECD Countries: Is There a Relationship?

24 Pages Posted: 30 Jul 2009

See all articles by Thushyanthan Baskaran

Thushyanthan Baskaran

University of Goettingen (Göttingen)

Lars P. Feld

Walter Eucken Institute; University of Freiburg - College of Economics and Behavioral Sciences; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: July 1, 2009

Abstract

We study the relationship between fiscal decentralization and economic growth for 23 OECD countries from 1975 to 2001 by using new panel data on sub-federal tax autonomy. While initial estimations suggest that fiscal decentralization causes lower growth rates, we find that this result is not robust to alternative specifications. We also fail to obtain evidence for a negative relationship in a number of additional robustness checks. We thus conclude that fiscal decentralization is unrelated to economic growth.

Keywords: fiscal federalism, sub-national fiscal autonomy, tax competition

JEL Classification: H77, H73, H71, D78

Suggested Citation

Baskaran, Thushyanthan and Feld, Lars P., Fiscal Decentralization and Economic Growth in OECD Countries: Is There a Relationship? (July 1, 2009). CESifo Working Paper Series No. 2721, Available at SSRN: https://ssrn.com/abstract=1441152

Thushyanthan Baskaran

University of Goettingen (Göttingen) ( email )

Platz der Gottinger Sieben 3
Gottingen, D-37073
Germany

Lars P. Feld (Contact Author)

Walter Eucken Institute ( email )

Goethestrasse 10
Freiburg im Breisgau, Baden-Württemberg D-79100
Germany

University of Freiburg - College of Economics and Behavioral Sciences ( email )

Freiburg, D-79085
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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