The Impact of Fiscal Decentralization on Economic Development

Investment Management and Financial Innovations, Volume 16, Issue 3, 2019

12 Pages Posted: 6 Aug 2019

See all articles by Mykola Pasichnyi

Mykola Pasichnyi

Kyiv National University of Trade and Economics

Tetiana Kaneva

Kyiv National University of Trade and Economics

Maksym Ruban

Kyiv National University of Trade and Economics, Students

Anton Nepytaliuk

Vinnytsia Institute of Trade and Economics of State University of Trade and Economics

Date Written: July 11, 2019

Abstract

In this article, updated approach to assess the impact of fiscal decentralization on economic development is offered. The relationship between the proper level of fiscal decentralization and economic growth for 27 advanced and emerging economies in Europe from 1992 to 2017 was evaluated using panel data. In the EU members, Belarus, Georgia and Ukraine expenditures decentralization was more essential than revenue decentralization. The vast majority of the counties from Central and Eastern Europe have increased the level of fiscal decentralization since 1992. It was found that revenue decentralization was associated with lower growth rates, while expenditures decentralization could slightly encourage economic development. The overall decentralization indicator adversely affected the growth, but that interconnection was not robust. The empirical investigation showed significant role of demographic structure and sustainability to ensure economic development. The authors propose the statements for the local authorities to develop the methodical bases of the fiscal policy’s design. In the survey, a balanced approach to the tax and public spending policy’s preparation and planning is presented.

Keywords: fiscal policy, fiscal decentralization, tax autonomy, economic development, economic welfare

JEL Classification: E62, H71, H72, H77

Suggested Citation

Pasichnyi, Mykola and Kaneva, Tetiana and Ruban, Maksym and Nepytaliuk, Anton, The Impact of Fiscal Decentralization on Economic Development (July 11, 2019). Investment Management and Financial Innovations, Volume 16, Issue 3, 2019, Available at SSRN: https://ssrn.com/abstract=3430955

Mykola Pasichnyi (Contact Author)

Kyiv National University of Trade and Economics ( email )

19 Kyoto st.
Kyiv, 02156
Ukraine

Tetiana Kaneva

Kyiv National University of Trade and Economics

19 Kyoto st.
Kyiv, 02156
Ukraine

Maksym Ruban

Kyiv National University of Trade and Economics, Students

19 Kyoto st.
Kyiv, 02156
Ukraine

Anton Nepytaliuk

Vinnytsia Institute of Trade and Economics of State University of Trade and Economics ( email )

Soborna street, 87
Vinnytsia, 21050
Ukraine

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