Fiscal decentralization and economic growth in the United States

Article Abstract:

A general analytical model that describes the relationship between fiscal decentralization and economic growth is presented. This endogenous growth model includes a production function with two inputs, namely, private capital and public spending. The function demonstrates constant returns to scale in the two inputs mentioned. This model assumes that the federal, state and local levels of government are all engaged in public spending. This analytical model is applied to the US economy using data between 1948 and 1994 to examine the effect of fiscal decentralization on growth. Results demonstrated the consistency of the existing spending shares for state and local governments with growth maximization. It follows that progressive decentralization in public spending may be detrimental to growth.

Economic aspects, Government spending policy, Fiscal policy, Decentralization in government, Government decentralization

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Fiscal decentralization and economic growth: a cross-country study

Article Abstract:

A theoretical model is constructed to demonstrate the association between economic expansion and fiscal decentralization using a panel empirical data set covering the years 1970-1989 of 46 developed and developing nations. The model presumes, with no generality loss, that there are three levels of government: local, state and federal. Fiscal decentralization is defined as the transfer of power of some type from the national government to sub-national governments. Fiscal decentralization level is contingent on the spending of the sub-national governments as a proportion of total government spending. The model shows that, given other growth determinants, there is a negative relationship between decentralization and economic growth for developing countries but none in developing countries.

Analysis, Economic policy, Political aspects, Intergovernmental fiscal relations

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Explaining variations in employment growth: structural and cyclical change among states and local areas

Article Abstract:

The effects of costs, industrial concentration, and national economic trends on regional growth were studied. A model was developed to explain the differences in growth among 48 states. Traditional cost variables were used, along with a variable that measured the interaction of national economic trends and industrial concentration at the state level. The long-term secular effects between 1970 and 1980 were compared to the short-term effects from 1973 to 1975, 1975 to 1979, and 1981 to 1982. The model demonstrated that many of the differences in employment growth among states could be explained by national economic trends and cost factors, but it could not explain intrastate differences in growth rates.

Economic history, Regional economics

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