Fiscal decentralisation and economic growth: Is there a relationship?

Abstract

The main objective of this paper is to study the concept of fiscal decentralisation and the influence of fiscal decentralisation on economic growth in selected European Union countries during the period of 2004 – 2014. Academic interest in fiscal decentralisation began in the 1950s, when the original Tiebout (1950) article on the theory of local government management level cost created a base for never-ending debate about fiscal decentralisation effect on well-being of the country. The empirical literature analysing the influence of fiscal decentralisation on economic growth has emerged since the 1990s. The relevant studies vary as to whether they use time series, cross-sectional or panel data, as to whether they rely on single-country or cross-country samples, and they vary in fiscal decentralisation measures, estimation methods and sample composition. The empirical analysis was based on the method of Simple Additive Weighting (SAW) and regression analysis. The data analysis has revealed that there is a relationship between fiscal decentralisation and economic growth.