The Impact of Fiscal Decentralization on Economic Growth in Central and Eastern Europe

Korotun, Volodymyr; Kaneva, Tetiana; Drepin, Anton; Levaieva, Ludmila; Kucherenko, Svitlana

doi:10.14207/ejsd.2020.v9n3p215

Cited by 5 publications

(4 citation statements)

References 9 publications

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“…Studies like (Slavinskarite, 2017), [20,21] have empirically proven that developed economies of Europe have a higher degree of fiscal decentralization and more power for financial solutions than the emerging countries. In terms of economic growth, Chugunoy, Makohon and Krykun [22], as well as Korotun, Keneva, Drepin, Levaleva and Kucherenko, [17] investigated the impact of fiscal decentralization on economic growth and GDP per capita growth of emerging markets respectively. Similarly, Permai, Christina, and Gunawan [23] investigated the effect of fiscal decentralization indicators on regional economic performance and found spatial dependencies and spatial heterogeneity on economic performance between locations that affect economic performance using geographically weighted regression (GWR).…”

Section: Literature Reviewmentioning

confidence: 99%

“…"To enhance economic growth and development potentials, developing countries have embraced the decentralization of public spending and revenue collection from governments to subnational government" (Aigbokhan,1999) "Thus, the issue of tax jurisdictions, expenditure assignment and which tier of government can best deliver social services to accelerate economic development continues to be the focus of active and extensive research" [2]. Although, fiscal decentralization has the risks of horizontal fiscal imbalances, but it could increase the capacity and efficiency for high-quality public goods and services [17].…”

Section: Introductionmentioning

confidence: 99%

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Fiscal Decentralization and Social Service Delivery Policy Response in Nigeria

Edame

Okoi

Aja

et al. 2023

JEMT

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This study examines the impact of fiscal decentralization on social delivery policy response in Nigeria, utilizing panel data for fourteen states in Nigeria for the period covering from 2000 to 2019. Specifically, this study evaluates the impact of fiscal autonomy on social indicators such as infant mortality rate, maternal mortality rate and adult literacy rate. The panel vector error correction mechanism (PVECM) the granger causality test was employed as the estimation techniques. The result of the granger causality test to determine the direction of causality relationship among the variables in the estimated model showed that there was one way directional causality running from maternal mortality rate (MMR) to fiscal autonomy (FISA); adult literacy rate (ADLIT) to population (LPOP); population (LPOP) to maternal mortality rate (MMR), adult literacy rate (ADLIT) to maternal mortality rate (MMR), and education expenditure (LEDU) to fiscal autonomy (FISA). This means that maternal mortality granger caused fiscal autonomy in Nigeria. The result also implies that adult literacy rate granger caused growth in population, and growth in population granger caused maternal mortality rate in Nigeria. The error correction variable in the infant mortality rate equation has the coefficient of 0.069. This indicates that approximately 6.9 percent of the distortion in the system would be corrected each whenever the system moves away from equilibrium. This depicts a slower speed of adjustment mechanism from the disequilibrium in the short run to equilibrium in the long run. The estimated infant mortality rate equation has a very good fit on the data and very high explanation power, given the adjusted R-squared of 0.736. The adjusted R-squared of 0.736 showed that approximately 74 percent of variation in the dependent variable (infant mortality rate) was accounted for by variations in the independent variables. This result is not in agreement with the theoretical postulate. In real term, the result showed that an increase in education expenditure by one percent would lead to a decrease in adult literacy rate by 0.22 percent, other things being equal. This result showed that spending in education has not improved the literacy rate in Nigeria. This suggests that it is either the fact that spending in education by the government has been so small that it cannot bring about improvement in the literacy or that funds meant for educational projects are siphoned into private pause, thereby resulting to huge decline in terms of literacy rate. Lastly, growth in population has a declining effect on adult literacy rate in Nigeria. This inference is in accordance with a priori expectation showing that as population increase, pressure is being put on the existing educational facilities and overwhelm it, leading to the decline in adult literacy rate. In concrete term, an increase in population by one percent resulted to a decrease in adult literacy rate by 0.73 percent, other variables remaining the same. Based on our result, the study made some policy recommendation for the states to double their efforts in generating their internal revenue to become fiscally autonomous less reliance on the federal government for allocation. Also, there is need for the government to raise her expenditure in education and health sectors so as to increase the literacy rate and health sector outcomes in the country.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Fiscal Decentralization and Social Service Delivery Policy Response in Nigeria

Edame

Okoi

Aja

et al. 2023

JEMT

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“…However, to achieve these goals, local governments must also be well organized, which means that political decentralization must be followed by appropriate fiscal decentralization. Korotun et al (2020) assessed the impact of fiscal decentralization on GDP per capita growth for 13 countries in Central and Eastern Europe. The authors found that revenue decentralization and tax autonomy had a negative impact on economic growth.…”

Section: Literature Reviewmentioning

confidence: 99%

Impact of Political and Fiscal Decentralization on the Government Quality in Central and Eastern European Countries

Visković

Burnać

Herman³

2021

Ekonomska misao i praksa

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Since the 1970s, the process of decentralization has spread throughout the world, and today more than 95% of democratic countries are decentralized. Decentralization should lead to a well-organized and more efficient local government. Nevertheless, the empirical results are rather vague. The motivation for this paper is to examine the impact of political and fiscal decentralization on the quality of government in seventeen countries in Central and Eastern Europe for the period 1998 - 2012. The main objective of the paper is to explore whether fiscal decentralization positively influences the quality of government and whether political decentralization reduces its positive influence. An additional contribution of the paper comes from the introduction of a decentralization interaction variable. Our results have shown that fiscal decentralization has a positive impact on governance, while political decentralization was found to be statistically insignificant. Our results also showed that richer countries have higher government quality, that government size increases the level of corruption and decreases government quality, and that in more democratic countries politicians behave more responsibly and accountably, which decreases the level of corruption and increases government quality. We conclude that political decentralization cancels out the positive effects of fiscal decentralization on the quality of government, which can be explained by less developed institutions at the local level in Central and Eastern European countries.

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“…In its development, fiscal decentralization then developed into the core of the implementation of regional autonomy itself. Even through a process of responsible fiscal decentralization, local governments will be able to increase economic growth and welfare of their people (Oates, 1993;Ganaie et al, 2018;Sasana, 2019;De Siano and D'uva, 2017;Aslim and Neyapti, 2017;Korotun, et al, 2020). The concept of decentralization is also expected to be better able to succeed development goals through the provision of control rights to people who have information and incentives to make decisions that are in accordance with their needs so that they are expected to improve the quality and efficiency of public services, in order to fulfill sectoral services and obligations to the community (Hirawan, 2007; Bardhan and Christopher, 1999;Hanif, Wallace, and Gago-de-Santos, 2020).…”

Section: Introductionmentioning

confidence: 99%

The Impact of Fiscal Decentralization on the Efficiency of Health Expenditure and Welfare: Case Study of South Sulawesi Province

Azwar

2022

jafr. Patria. Artha. of. Accounting. &. Financial. Reportin

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The objective of this study is to analyze: (i) the efficiency level of health function expenditure in the region; (ii) the impact of fiscal decentralization on the efficiency of health function expenditure in the region; and (iii) the implications of health function expenditure efficiency at the level of people welfare in the region. The study used quantitative approaches with Data Envelopment Analysis (DEA) and Dinamic Generalized Method of Moment (DGMM) analysis techniques. The results showed that the realization and utilization of expenditure in most districts/cities in South Sulawesi Province ran less efficient. From the results of DGMM, it was found that Regional Own-source Revenue has a negative and significant impact on the efficiency of health function expenditure, while Balance Funds also have a negative but insignificant effect. Increased efficiency of health function expenditure will be followed by improvements in people's well-being. Meanwhile, fiscal decentralization policies both in the form of Regional Own-source Revenue and Balance Funds, also have a positive effect on welfare, but are limited (insignificant).

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The Impact of Fiscal Decentralization on Economic Growth in Central and Eastern Europe

Cited by 5 publications

References 9 publications

Fiscal Decentralization and Social Service Delivery Policy Response in Nigeria

Fiscal Decentralization and Social Service Delivery Policy Response in Nigeria

Impact of Political and Fiscal Decentralization on the Government Quality in Central and Eastern European Countries

The Impact of Fiscal Decentralization on the Efficiency of Health Expenditure and Welfare: Case Study of South Sulawesi Province

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