CIAO DATE: 07/02

Fiscal Decentralisation & Economic Growth in High-Income OECD Countries

Abstract

Following a brief review of the benefits and shortcomings of fiscal decentralisation, the paper attempts to empirically analyse for high-income OECD countries the relationship between per capita economic growth, capital formation and total factor productivity growth, on the one hand, and indicators of fiscal decentralisation, on the other hand. The evidence appears to be consistent with the hypothesis that the benefits of fiscal decentralisation on economic growth and capital formation are limited. However, satisfactory indicators of fiscal decentralisation are yet not existing so that the results are subject to serious qualifications.

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