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

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  • Meloche, Jean-Philippe
  • Vaillancourt, Francois
  • Yilmaz, Serdar

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.

Suggested Citation

  • Meloche, Jean-Philippe & Vaillancourt, Francois & Yilmaz, Serdar, 2004. "Decentralization or fiscal autonomy ? What does really matter ? effects on growth and public sector size in European transition countries," Policy Research Working Paper Series 3254, The World Bank.
    • Handle: RePEc:wbk:wbrwps:3254
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    References listed on IDEAS

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    1. repec:kap:iaecre:v:17:y:2011:i:2:p:134-156 is not listed on IDEAS
    2. Schakel, Arjan Hille, 2009. "A Postfunctionalist Theory of Regional Government," MPRA Paper 21596, University Library of Munich, Germany.
    3. Maria Letitia Andronic (Bratulescu), 2016. "The Degree of Autonomy of the Romanian Local Public Expenditures," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 12(2), pages 146-160, April.
    4. Schakel, Arjan H., 2008. "Validation of the Regional Authority Index," MPRA Paper 8972, University Library of Munich, Germany.
    5. Dufrénot, G. & Frouté, P. & Schalck, C., 2010. "The French Regions’ Borrowing Behaviours. How heterogeneous are they?," Working papers 289, Banque de France.
    6. Mihaela Onofrei & Lenuta Cojocariu & Florin Oprea, 2021. "Interconnections between local finances and regional development: a study case of Romania," Journal of Financial Studies, Institute of Financial Studies, vol. 10(6), pages 9-32, May.
    7. repec:aic:jopafl:y:2012:j:1:cigue is not listed on IDEAS
    8. Dubravka Jurlina Alibegovic, 2014. "Fiscal Autonomy ? Opportunity or Limitation for Innovative Local Development in Croatia?," ERSA conference papers ersa14p945, European Regional Science Association.
    9. Davide Eltrudis, 2022. "On the Financial Autonomy of European Local Governments: The Case of Municipal Bonds in Italy," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 226-242.
    10. Alibegović Dubravka Jurlina & Hodžić Sabina & Bečić Emira, 2019. "The Level of Fiscal Autonomy: Evidence from Croatia, Serbia and Bosnia and Herzegovina," NISPAcee Journal of Public Administration and Policy, Sciendo, vol. 12(1), pages 91-112, June.
    11. Elena CIGU, 2013. "Financial Revenue Autonomy Of Local Budgets In Romania. Measuring Approach," Journal of Public Administration, Finance and Law, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 3(3), pages 59-67, June.
    12. Maria Teresa Balaguer‐Coll & Isabel Narbón‐Perpiñá & Jesús Peiró‐Palomino & Emili Tortosa‐Ausina, 2022. "Quality of government and economic growth at the municipal level: Evidence from Spain," Journal of Regional Science, Wiley Blackwell, vol. 62(1), pages 96-124, January.
    13. Soko Aida, 2018. "(Dis)Advantages af Decentralization Models Driven by Non-Economic Reasons: The Case of Bosnia and Herzegovina," South East European Journal of Economics and Business, Sciendo, vol. 13(1), pages 81-92, June.
    14. Johann Bröthaler & Michael Getzner, 2011. "Fiscal Autonomy and Total Government Expenditure: An Austrian Case-study," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 17(2), pages 134-156, May.
    15. Elena CIGU, 2014. "An Aproach Of Local Financial Autonomy And Implication Over Sustainable Development In The Knowledge Society," Journal of Public Administration, Finance and Law, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 6(6), pages 44-53, December.
    16. Soto, Victoria Eugenia & Farfan, Maria Isabel & Lorant, Vincent, 2012. "Fiscal decentralisation and infant mortality rate: The Colombian case," Social Science & Medicine, Elsevier, vol. 74(9), pages 1426-1434.
    17. Elena CIGU & Florin OPREA, 2012. "Method Of Determining The Degree Of Autonomy Of The Administrative-Territorial Units?," Journal of Public Administration, Finance and Law, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 1(1), pages 7-15, June.
    18. Maria Letitia Andronic (Bratulescu), 2016. "The Degree of Autonomy of the Romanian Local Public Expenditures," EuroEconomica, Danubius University of Galati, issue 2(12), pages 146-160, April.
    19. Diego Pinilla & Juan de Dios Jiménez & Roberto Montero, 2013. "Dimensión del Estado y descentralización fiscal. Elementos para el debate desde la experiencia reciente de América Latina," Revista de Economía del Rosario, Universidad del Rosario, June.
    20. Iimi, Atsushi, 2005. "Decentralization and economic growth revisited: an empirical note," Journal of Urban Economics, Elsevier, vol. 57(3), pages 449-461, May.
    21. Sharma, Chanchal Kumar, 2004. "Decentralization Dilemma: Measuring the Degree and Evaluating the Outcomes," MPRA Paper 204, University Library of Munich, Germany, revised Nov 2005.
    22. Philip Bodman & Harry Campbell & Kelly-Ana Heaton & Andrew Hodge, "undated". "Fiscal Decentralisation, Macroeconomic Conditions and Economic Growth in Australia," MRG Discussion Paper Series 2609, School of Economics, University of Queensland, Australia.
    23. Patonov Nikolay Andonov, 2013. "Searching for A Restraint on the European Leviathan," Scientific Annals of Economics and Business, Sciendo, vol. 60(2), pages 1-16, December.
    24. Philip Bodman & Kelly-Ana Heaton & Andrew Hodge, "undated". "Fiscal Decentralisation and Economic Growth: A Bayesian Model Averaging Approach," MRG Discussion Paper Series 3509, School of Economics, University of Queensland, Australia.
    25. Cristinel ICHIM, 2012. "Financial side analysis of local autonomy in Romania," Anale. Seria Stiinte Economice. Timisoara, Faculty of Economics, Tibiscus University in Timisoara, vol. 0, pages 911-918, May.

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