European Financial and Accounting Journal 2014, 9(1):22-40 | DOI: 10.18267/j.efaj.113

Fiscal Decentralisation and Economic Development in Selected Unitary European Countries

Irena Szarowská
Ing. Irena Szarowská, Ph.D. - Assistant Professor; Department of Finance and Accounting, School of Business Administration in Karviná, Silesian University in Opava, Univerzitní nám. 1934/3, 733 40 Karviná, Czech Republic; .

The article provides direct empirical evidence on fiscal decentralisation and economic development in selected European countries in a period 1995-2012. The research (based on data taken from OECD Fiscal Decentralisation Database and OECD) is performed on a panel, which contains 17 unitary countries. Explanatory variables are not examined in individual regressions, but study newly uses Generalized Method of Moments. For a model specification, Dynamic Panel Data Model Wizard is applied. Results of dynamic panel analysis suggest positive and statistically significant impact of expenditure decentralisation and stronger but negative effect of revenue decentralisation on economic development. Effect of tax decentralisation seems to be negative but statistically insignificant. These findings are enormously interesting as the relationship between the different decentralisation measures and economic performance evolves in opposite directions and countries tend to increase revenue fiscal decentralisation over the last years.

Keywords: Dynamic panel data, Economic growth, Fiscal decentralisation
JEL classification: E62, H71, H72, H77

Published: March 1, 2014  Show citation

ACS AIP APA ASA Harvard Chicago IEEE ISO690 MLA NLM Turabian Vancouver
Szarowská, I. (2014). Fiscal Decentralisation and Economic Development in Selected Unitary European Countries. European Financial and Accounting Journal, 9(1), 22-40. doi: 10.18267/j.efaj.113
Download citation
  • BibTeX (.bib)
  • Bookends (.ris)
  • EasyBib (.ris)
  • EndNote (.enw)
  • EndNote 8 (.xml)
  • ISI WoS (.isi)
  • Medlars (.medlars)
  • Mendeley (.ris)
  • MODS (.xml)
  • Papers (.ris)
  • RefWorks (.txt)
  • RefManager (.ris)
  • RIS (.ris)
  • MS Word (.xml)
  • Zotero (.ris)
    • Open full article

    References

    1. Akai, N. - Sakata, M. (2002): Fiscal decentralisation contributes to economic growth: evidence from state-level cross-section data for the United States. Journal of Urban Economic, 2002, vol. 52, no. 1, pp. 93- 108. Go to original source...
    2. Arellano, M. - Bond, S. (1991): Some tests of specification for panel data. The Review of Economic Studies, 1991, vol. 58, no. 2, pp. 277-297. Go to original source...
    3. Baskaran, T. - Feld, L.P. (2013): Fiscal decentralisation and economic growth in OECD countries. Is there a relationship? Public Finance Review, 2013, vol. 41, no. 4, pp. 421-445. Go to original source...
    4. Bird, R. M. - Wallich, C. I. (1993): Fiscal decentralisation and intergovernmental relations in transition economies. World Bank Policy Research Working Paper, no. 1122, 1993.
    5. Blöchliger, H. (2013): Decentralisation and economic growth-Part 1: How fiscal federalism affects long-term development. OECD Working Papers on Fiscal Federalism no. 14, 2013. Go to original source...
    6. Blöchliger, H. - Égert, B. (2013): Decentralisation and economic growth - Part 2: The impact on economic activity, productivity and investment. OECD Working Papers on Fiscal Federalism no. 15, 2013. Go to original source...
    7. Brennan, G. - Buchanan, J. (1980): The power to tax: Analytical foundations of a fiscal constitution. Cambridge, Cambridge University Press, 1980.
    8. Davoodi, H. - Zou, H. (1998): Fiscal decentralisation and economic growth: A cross-country study. Journal of Urban Economics, 1998, vol. 43, no. 2, pp. 244-257. Go to original source...
    9. Gemmell, N. - Kneller, R. - Sanz, I. (2013): Fiscal decentralisation and economic growth: Spending versus revenue decentralisation. Economic Inquiry, 2013, vol. 51, no. 4, pp. 1915-1931. Go to original source...
    10. Halásková, M. - Halásková, R. (2014): Impacts of decentralisation on the local government expenditures and public services in the EU countries. Lex Localis - Journal of Local Self Government, 2014, vol. 12, no. 3, pp. 623-642. Go to original source...
    11. Hansen, L. P. (1982): Large sample properties of Generalized Method of Moments Estimators. Econometrica, 1982, vol. 50, no. 4, pp. 1029-1054. Go to original source...
    12. Iimi, A. (2005): Decentralisation and economic growth revisited: An empirical note. Journal of Urban Economics, 2005, vol. 57, no. 3, pp. 449-461. Go to original source...
    13. Oates, W. E. (1993): Fiscal decentralisation and economic development. National Tax Journal, 1993, vol. 46, no. 2, pp. 237-243. Go to original source...
    14. OECD (2013): Fiscal federalism 2014: Making decentralisation work. Paris, OECD Publishing, 2013. Go to original source...
    15. Rodden, J. (2002): The dilemma of fiscal federalism: grants and fiscal performances around the world. American Journal of Political Science, 2002, vol. 46, no. 3, pp. 670-687. Go to original source...
    16. Rodríguez-Pose, A. - Ezcurra, R. (2011): Is fiscal decentralisation harmful for economic growth? Evidence from the OECD countries. Journal of Economic Geography, 2011, vol. 11, no. 4, pp. 619-643. Go to original source...
    17. Rodríguez-Pose, A. - Krøijer, A. (2009): Fiscal decentralisation and economic growth in Central and Eastern Europe. London School of Economics and Political Science LEQS Paper no. 12, 2009. Go to original source...
    18. Szarowská, I. (2013): Effects of taxation by economic functions on economic growth in the European Union. In Jircikova, E. - Knapkova, A. - Pastuszkova, E. (eds.): Proceedings of the 6th International Scientific Conference: Finance and the performance of Firms in Science, Education and Practice. Zlin, Tomas Bata University, pp. 746-758.
    19. Tanzi, V. (1995): Fiscal federalism and decentralisation: A review of some efficiency and macroeconomic aspects. In Bruno, M. - Pleskovic, B. (eds.): Annual World Bank Conference on Development Economics. Washington, DC, World Bank, pp. 295-316, 1995.
    20. Thiessen, U. (2003): Fiscal decentralisation and economic growth in high income OECD countries. Fiscal studies, 2003, vol. 61, no. 1, pp. 64-70. Go to original source...
    21. Thornton, J. (2007): Fiscal decentralisation and economic growth reconsidered. Journal of Urban Economics, 2007, vol. 61, no. 1, pp. 64- 70. Go to original source...
    22. Vasquez, J. - McNab, R. M. (2003): Fiscal decentralisation and economic growth. World Development, 2003, vol. 31, no. 9, pp. 1597- 1616. Go to original source...
    23. Zhang, T. - Zou, H. (1998): Fiscal decentralisation, public spending, and economic growth in China. Journal of Public Economics, 1998, vol. 67, no. 2, pp. 221-240. Go to original source...

    This is an open access article distributed under the terms of the Creative Commons Attribution 4.0 International License (CC BY 4.0), which permits use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.


    Return to the content