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Fiscal Federalism, Decentralization and Economic Growth: Survey and Meta-Analysis

55 Pages Posted: 9 Oct 2014  

Thushyanthan Baskaran

University of Goettingen (Gottingen)

Lars P. Feld

Walter Eucken Institute

Jan Schnellenbach

BTU Cottbus-Senftenberg, Institute for Economics, Chair for Microeconomics; Walter Eucken Institute

Date Written: September 30, 2014

Abstract

The theoretical literature on the economics of fiscal federalism has identified several potential effects of government decentralization on economic growth. Much of the traditional literature focuses on the efficiency aspects of a decentralized provision of public services. However, decentralization may also increase growth by raising the ability of the political system to innovate and carry out reforms. On the contrary, some authors argue that decentralization increases corruption and government inefficiency. After a discussion of the theoretical arguments, we provide both a traditional survey and a meta-analysis of the empirical literature on decentralization and economic growth. Based on our survey, we identify open questions and discuss possible ways of answering them.

Keywords: fiscal federalism, fiscal competition, economic growth, meta-analysis

JEL Classification: C180, E020, H110, H770, O430

Suggested Citation

Baskaran, Thushyanthan and Feld, Lars P. and Schnellenbach, Jan, Fiscal Federalism, Decentralization and Economic Growth: Survey and Meta-Analysis (September 30, 2014). CESifo Working Paper Series No. 4985. Available at SSRN: https://ssrn.com/abstract=2507735

Thushyanthan Baskaran

University of Goettingen (Gottingen) ( 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

Jan Schnellenbach

BTU Cottbus-Senftenberg, Institute for Economics, Chair for Microeconomics ( email )

Erich-Weinert-Str. 1
Cottbus, 03046
Germany

HOME PAGE: http://https://www.b-tu.de/fg-vwl-mikro/team/prof-dr-jan-schnellenbach

Walter Eucken Institute ( email )

Goethestr. 10
Freiburg, 79100
Germany

HOME PAGE: http://www.eucken.de

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