Acta academica karviniensia 2015, 15(2):136-147 | DOI: 10.25142/aak.2015.024

IMPACT OF FISCAL DECENTRALISATION ON ECONOMIC DEVELOPMENT IN THE EUROPEAN UNION

Irena Szarowská
Slezská univerzita, Obchodnì podnikatelská fakulta, Univerzitní nám. 1934/3,733 40 Karviná, Email:szarowska@opf.slu.cz

The article investigates the impact of fiscal decentralisation on a long-term economic development. The aim of the article is to examine and quantify influence of fiscal decentralisation on output in the European Union in the period 1995-2012. The empirical evidence (based on data taken from OECD Fiscal Decentralisation Database and OECD) is performed on a panel which contains 21 countries. Methodology is applied in accordance to Blöchliger (2013), but explanatory variables are not examined in individual regressions, but the analysis newly uses Generalized Method of Moments (Dynamic Panel Data). For a model specification, Dynamic Panel Data Model Wizard is applied. Results of dynamic panel analysis suggest positive impact of expenditure decentralisation, negative effect of revenue decentralisation and negative but statistically insignificant impact of tax decentralisation on economic development. Based on the empirical results, the study suggests that sub-central governments should be given more autonomy and authority in fiscal expenditure matters. These findings are interesting as central governments must often face to tendence of sub-central governments to increase revenue fiscal decentralisation over the last years.

Keywords: dynamic panel data, economic development, expenditure decentralisation, fiscal decentralisation, fiscal federalism, revenue decentralisation
JEL classification: E62, H71, H72, H77

Received: February 9, 2015; Accepted: September 23, 2015; Published: June 30, 2015  Show citation

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Szarowská I. IMPACT OF FISCAL DECENTRALISATION ON ECONOMIC DEVELOPMENT IN THE EUROPEAN UNION. Acta academica karviniensia. 2015;15(2):136-147. doi: 10.25142/aak.2015.024.
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