Growth incentives and devolved fiscal systems

Katerina Lisenkova

No 2009, Working Papers from University of Strathclyde Business School, Department of Economics

Abstract: This paper explores the characteristics of a range of stylised devolved fiscal systems which have been applied, or proposed, as a means of funding the devolved Scottish Government. The central aim is to identify those fiscal mechanisms that most effectively incentivise the pursuit of growth promoting policies by the regional government. This implies identifying the extent to which different fiscal arrangements reinforce effective local growth policies by resulting in increased devolved budgets. Simulations using an inter-temporal, computable general equilibrium model for Scotland, fail to rank uniquely a range of devolved fiscal systems on this criterion over a range of demand- and supply-side policy interventions. Moreover, rather counter-intuitively, tax-sharing regimes do not necessarily improve growth incentives relative to more basic block grants.

Keywords: regional fiscal autonomy; regional fiscal systems; applied general equilibrium. (search for similar items in EconPapers)
JEL-codes: D58 H24 H71 R13 R15 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2020-06
New Economics Papers: this item is included in nep-ure
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