Direct and indirect effects of fiscal decentralisation on economic growth

Nebojsa Stojcic and Meri Suman Tolic

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examines the direct and indirect effects of decentralization on economic growth that take place through transmission channels such as government efficiency, control of corruption, public sector size and the quality of living. A dynamic nature of growth, potential endogeneity and the distinction between short and long run effects are taken into account. Our findings support proactive government approach, including fiscal policy measures to stimulate demand, prevent decline of production and employment and rebuild trust in institutions. They question the current prevalent thinking about the beneficial effects of the reduction of public expenditure on economic growth.

Keywords: fiscal decentralization; economic growth; direct and indirect effects; dynamic analysis; European countries (search for similar items in EconPapers)
JEL-codes: H7 O4 (search for similar items in EconPapers)
Date: 2018-11, Revised 2019-05
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Published in Ekonomický časopis (Journal of Economics) 3.67(2019): pp. 280-306

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:108762

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