Prague Economic Papers 2018, 27(5):606-618 | DOI: 10.18267/j.pep.674

The Influences of Fiscal Decentralization on Economic Performance: Empirical Evidence from OECD Countries

Fuhmei Wang
Department of Economics and Department of Public Health, National Cheng Kung University, Tainan, Taiwan (fmwang@mail.ncku.edu.tw)

Based on OECD country experiences over the period from 1990 to 2015, this research rigorously investigates: (1) how fiscal autonomy effects economic growth; (2) whether there is an optimal level of decentralization; and (3) whether and how other factors influence economic performance in a decentralized economy. We find that revenue decentralization does not affect economic performance. The expenditure decentralization dividend in terms of an enhanced economic growth rate can be achieved only when the initial share of local government expenditure is smaller than the growth-maximizing degree through along with tax collection and trade openness.

Keywords: decentralization dividend, economic growth, OECD country experiences
JEL classification: C33, H77, O47

Accepted: April 13, 2018; Published: October 1, 2018  Show citation

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Wang, F. (2018). The Influences of Fiscal Decentralization on Economic Performance: Empirical Evidence from OECD Countries. Prague Economic Papers, 27(5), 606-618. doi: 10.18267/j.pep.674
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