Decentralization or fiscal autonomy ? What does really matter ? effects on growth and public sector size in European transition countries

Jean-Philippe Meloche, Francois Vaillancourt and Serdar Yilmaz

No 3254, Policy Research Working Paper Series from The World Bank

Abstract: This paper examines the importance of fiscal autonomy in the analysis of decentralization. Using new data published by the OECD (2001 and 2002), it reproduces several indicators and proposes new measures of decentralization that take into consideration su-bnational governments'autonomy over their revenues. Two models are reproduced: Davoodi and Zou (1998) on decentralization and economic growth,and Oates (1985), on decentralization and public sector size. Some evidence suggests that fiscal autonomy positively affects economic growth. Also, it seems to affect the size of the state, but evidence on this relation is limited. Despite some statistical weaknesses, there are sufficient indications to argue that sub-national governments'fiscal autonomy should be a major concern when measuring decentralization.

Keywords: Public Sector Economics&Finance; Urban Economics; Banks&Banking Reform; Municipal Financial Management; Economic Theory&Research; Banks&Banking Reform; Public Sector Economics&Finance; Municipal Financial Management; Economic Theory&Research; National Governance (search for similar items in EconPapers)
Date: 2004-03-01
New Economics Papers: this item is included in nep-eec, nep-pol and nep-tra
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Citations: View citations in EconPapers (26)

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