Impact of Fiscal Decentralization on Non-Oil Economic Growth in a Resource-Rich Economy

Abstract

The paper investigates effects of fiscal decentralization on non-oil sector development in case of Azerbaijan for the quarterly period of 2002 through 2013. Results obtained from Auto-regressive Distributed Lag Bounds Testing approach show that share of local expenditures and revenues in total, measures of fiscal decentralization, have negative impact on non-oil GDP. This finding is consistent with other studies outcomes and can be considered adequate for the Azerbaijani economy due to the number of institutional constraints. The results of the research would provide a good insight for policy makers in implementing economic reforms to develop institutional aspects of decentralization and thus make it supportive for non-oil economic growth.

Keywords: Fiscal Decentralization Economic Development; Local Government; Azerbaijan; Resource-Rich Economy

JEL Classification: H11; H20; H61; H71; H72