Empirical Implications of Decentralization Dimensions and the Role of Political Institutions in the Economic Growth of Pakistan

Muhammad Shahid and Rukhsana Kalim
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Muhammad Shahid: National College of Business Administration & Economics, Pakistan

Empirical Economic Review, 2021, vol. 4, issue 1, 52-80

Abstract: Decentralization is the fundamental policy variable used to enhance the allocative efficiency through public spending / tax priorities, subject to the local demand. The current study evaluates the impact of the various dimensions of decentralization on the economic growth of Pakistan for the years 1972-2018. Ng-Perron tests and Kwiatkowski-Phillips-Schmidt-Shin (KPSS) were applied to fix the unit root problem in the time series data. To find the cointegration among decentralization, the role of institutions, and economic growth the Autoregressive Distributed Lag Approach (ARDL) was used. The outcomes suggested that tax decentralization is a growth promoting policy. On the contrary, administrative and political decentralization negatively affect the economic growth. The analysis shows that political freedom also has a growth retarding impact on the economy. The current study is useful regarding the policy implications of the process of decentralization.

Keywords: Cointegration; Decentralization; Political Freedom (search for similar items in EconPapers)
JEL-codes: C22 D72 H77 O47 (search for similar items in EconPapers)
Date: 2021
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