Decentralization and economic growth reconsidered: The role of regional authority
Abstract
Most of the empirical analysis explores the relationship between fiscal decentralization and economic growth within an institutional void. This paper investigates the connection between fiscal decentralization and economic growth in different institutional settings in 21 OECD countries over the period 1970–2010. We find that the pro-growth effects of fiscal decentralization depend critically on the authority of sub-national governments: tax decentralization leads to higher (lower) rates of economic growth when coupled with high (low) administrative and political decentralization. Tax decentralization is more conducive for growth if sub-national taxes accrue mostly from autonomous revenues such as property taxes. Overall, this provides evidence of institutional complementarities at work among decentralization dimensions leading to relevant insights for policy implications.
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Biographies
Andrea Filippetti is Researcher at Institute for Regional Studies of the National Research Council of Italy (CNR) and Visiting Fellow at the London School of Economics and Political Science, Department of Geography and Environment. He is interested in political economy, decentralization, technological change and the globalization of science and technology. He has been Fulbright Schuman Post Doc at Harvard University, Center for European Studies, and Marie Curie Fellow at the London School of Economics and Political Science. He has published several articles on journals such as Research Policy, World Development, Regional Studies, Technological Forecasting and Social Change.
Agnese Sacchi is Assistant Professor in Economics at Universitas Mercatorum (Rome, Italy) and Research Fellow at Governance and Economics research Network (GEN, Spain). She is interested in public economics, fiscal decentralization, fiscal policy and political economy issues. She has published articles on journals such as Public Choice, European Journal of Political Economy, Economics Letters, Regional Studies.
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Article first published online: July 26, 2016
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