Fiscal decentralization and economic growth : evidence from regional-level panel data for Colombia

Abstract

This paper provides evidence on the positive role of fiscal decentralization on regional economic growth in Colombia since the promulgation of the Political Constitution of 1991. The empirical strategy involved the choice of a suitable estimator for the panel data approach, the Augmented Mean Group Estimator, which allows adding unobserved determinants suggested by literature to traditional long term explanatory factors. The strategy was complemented with exercises that helped us to support the results coming from (i) crosssection models for different periods and various control variables, (ii) test on the complementarity hypothesis between public goods provided by different jurisdictions (spillover effects), and (iii) an assessment of unconditional convergence in regional income differences.

Fiscal decentralization and regional economic growth: Evidence from Mexico since the 2000s

“…Additionally, we observe that the contribution of conditional transfers to the variation of local GDP is more significant than the contribution of unconditional transfers. Overall, the finding of a positive impact of federal transfers to regional economic growth in this study is consistent with Pinilla‐Rodríguez et al (2016), Lozano and Julio (2015), Buser (2011), Cantarero and Pérez‐González (2009), Iimi (2005), and Davoodi and Zou (1998), among others. Albeit weak, the positive effect of unconditional transfers on growth suggests that state governments might directly or indirectly care for regional economic performance, even when they are not obliged by law to do so.…”

“…The authors hypothesize that greater autonomy could explain the incentives of local governments to promote growth and also argue that, if the public expenditure positively correlates with the production level, then decentralization can lead to economic growth. By employing a panel data approach, Lozano and Julio (2015) provide evidence on the decisive role of fiscal decentralization and regional economic growth in Colombia since the promulgation of the Political Constitution in 1991.…”

Fiscal decentralization and economic growth in eu countries from the country size, government structure, and EU accession perspective

“…Much more empirical research on the impact of fiscal decentralization on economic growth, especially in the last two decades, has been conducted at the country level, including the following countries: the US (Xie, Zou and Davoodi, 1999;Akai and Sakata, 2002;Bojanic, 2018), Switzerland (Feld et al, 2004), Nigeria (Cyril, 2016;Sylvester andAde, 2017), Spain (Carrion-i-Silvestre, Espasa andMora, 2008;Cantarero and Gonzales, 2009;Cantarero and Perez, 2012;Lago-Peñas, Fernandez-Leiceaga and Vaquero-García, 2017), Italy (Di Liddo, Magazzino and Porcelli, 2018); India (Ganaie et al, 2018), Malaysia (Hasnul, 2015), Bali (Kusuma and Badrudin, 2016), Columbia (Lozano-Espitia, Julio--Román and Lozano-Espitia, 2015;Lozano-Espitia and Julio, 2016), Slovakia (Maličká et al, 2017), Ukraine (Melnyk et al, 2018;Trusova et al, 2019), Indonesia (Nursini, 2019), Vietnam (Nguyen and Anwar, 2011;Thanh and Canh, 2020), China (Zhang and Zou, 1998;Lin and Liu, 2000;Qiao et al 2008;Yang, 2016;Sun, Chang and Hao, 2017), Russia (Yushkov, 2015), and Germany (Baskaran, Feld and Necker, 2017).…”

Financial Innovation Management: Impact of Fiscal Decentralization on Economic Growth of the Baltic Countries

“…(5) where yit is the GDP per capita for each country and year, 𝑍 𝑖𝑡 -fiscal decentralization measure index (FDI) for each country and year, 𝑋 𝑖𝑡 -quantitative indicators -is a set of six control variables that are found to be significant in almost all economic growth studies (Nguyen and Anwar, 2011;Baskaran and Feld, 2013;Cantarero and Gonzalez, 2009;Gemmell et al, 2013;Yushkov, 2015;Lozano and Julio, 2015).…”