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Fiscal Decentralisation and Economic Growth: Role of Democratic Institutions

Nasir Iqbal (), Musleh-ud Din () and Ejaz Ghani
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Ejaz Ghani: Pakistan Institute of Development Economics, Islamabad

No 2013:89, PIDE-Working Papers from Pakistan Institute of Development Economics

Abstract: This study attempts to analyse the impact of fiscal decentralisation on economic growth. It also examines the complementarity between fiscal decentralisation and democratic institutions in promoting growth. The modelling framework is the endogenous growth model augmented with the measures of fiscal decentralisation and democratic institutions. To capture the multidimensionality, three different measures of fiscal decentralisation are used. The overall analysis shows that revenue decentralisation promotes economic growth while expenditure decentralisation retards economic growth. Composite decentralisation positively influences economic growth implying that simultaneous decentralisation reinforces each other to promote economic growth. Analysis also shows that democratic institutions play a significant role in realising the benefits of fiscal decentralisation. Various policy implications emerge from this study.

Keywords: Fiscal Decentralisation; Democracy; Economic Growth; Pakistan (search for similar items in EconPapers)
JEL-codes: C26 E02 H11 H72 O11 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2013
New Economics Papers: this item is included in nep-fdg and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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https://www.pide.org.pk/pdf/Working%20Paper/WorkingPaper-89.pdf First Version, 2013 (application/pdf)

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Journal Article: Fiscal Decentralisation and Economic Growth: Role of Democratic Institutions (2012) Downloads
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