The Impact of Fiscal Decentralization on Economic Growth: A Multilevel Meta-Analysis Approach

Shirmehenji, Mohammad Bagher; Moradizadeh, Mahdiyeh; Nourahmadi, Mohammad Javad

doi:10.22054/joer.2023.70090.1095

Document Type : Research Paper

Authors

¹ Ph.D. Student in Economics, University of Mazandaran, Mazandaran, Iran

² Assistant Professor, Economics, Allameh Tabataba'i University, Tehran, Iran

https://doi.org/10.22054/joer.2023.70090.1095

Abstract

The theoretical literature on fiscal decentralization has identified several channels for the impact of this policy on economic growth. Some studies emphasize the positive effect of fiscal decentralization on economic growth, while others consider it as a potential factor reducing economic growth following its implementation. Due to this theoretical ambiguity, several studies in recent decades have attempted to empirically examine the effect of fiscal decentralization on economic growth. The findings of these studies are diverse and, in some instances, contradictory. To examine and conclude from these different results, this study uses a multilevel meta-analysis approach. To do so, we conducted a comprehensive review of empirical studies in the relevant field and applied a meta-analysis protocol for data selection. Ultimately, we identified 23 cross-country studies comprising 506 regressions and 635 coefficients for analysis. Studies that deviated from the protocol or lacked sufficient information for data extraction were excluded. The combined results of these individual studies, after accounting for publication bias and moderator variables, reveal that fiscal decentralization has a small and positive effect on economic growth. In addition, the results of this study showed that the indicators used to measure fiscal decentralization and economic growth, the period and sample of the countries under review, and the presence or absence of variables such as human capital, physical capital, investment rate, foreign investment, tax revenue, education, unemployment rate, political stability, population growth, urbanization rate, and public sector size in the regression models utilized in individual studies Significantly contribute to explaining the heterogeneity observed in their findings.

Keywords

References

سعیدی، نادر، حبیبی، فاتح، قادری، سامان. (1398). بررسی اثر تمرکززدایی مالی بر رشد اقتصادی در استان‌های کشور با استفاده از اقتصادسنجی فضایی. دو فصلنامه علمی مطالعات و سیاست‌های اقتصادی، 6(1)، 195-224.

غفاری‌فرد، محمد و صادقی شاهدانی، مهدی و کمیجانی، اکبر و زاهدی وفا، محمدهادی. (1393). تاثیر تمرکززدایی مالی بر رشد اقتصادی مناطق مختلف ایران (یک رهیافت اقتصادسنجی فضایی). فصلنامه پژوهش‌ها و سیاست‌های اقتصادی، 22(71)، 125-142. DOI: 20.1001.1.22519092.1391.17.4.1.7

گل‌خندان، ابوالقاسم، محمدیان منصور، صاحبه. (۱۳۹۵). بررسی تاثیر تمرکززدایی مالی بر رشد اقتصادی کشورهای منتخب در حال ‌توسعه: رهیافت دومرحله‌ای SGMM. فصلنامه سیاست‌های مالی و اقتصادی، ۴(13)، ۱۴۲-۱۱۵.

محمدی، نریمان، حاجی، غلامعلی، فطرس، محمدحسن. (1399). تاثیر تمرکززدایی مالی ترکیبی بر رشد اقتصادی استان‌های ایران. پژوهش‌های رشد و توسعه اقتصادی، 10(38)، 75-98. DOI: 10.30473/egdr.2019.46573.5221

Aan Zulyanto, S., Muljarijadi, B., & Purnagunawan, R. M. (2019). The Effect of Government Fragmentation and Fiscal Decentralization on Economic Growth in Indonesia. DLSU Business & Economics Review, 28(3), 91-103. DOI:10.5281/zenodo.3270548

Albehadili, A. F. S., & Hai, L. X. (2018). Impacts of Fiscal Decentralization and Economic Growth: A Meta-Analysis Approach. International Journal of Management Science and Business Administration, 4(5), 34-43.‏ DOI: 10.18775/ijmsba.1849-5664-5419.2014.45.1004

Asatryan, Z. (2010). Fiscal decentralization and economic growth in OECD countries: A Bayesian model averaging approach. Berlín, inédito, 1-31. DOI: 10.1177/1091142112463726

Baskaran, T., Feld, L. P., & Schnellenbach, J. (2016). Fiscal federalism, decentralization, and economic growth: a meta‐analysis. Economic Inquiry, 54(3), 1445-1463. DOI:10.1111/ecin.12331

Borenstein, M., Hedges, L. V., Higgins, J. P., & Rothstein, H. R. (2011). Introduction to meta-analysis. John Wiley & Sons.‏

Canavire-Bacarreza, G., Martinez-Vazquez, J., & Yedgenov, B. (2020). Identifying and disentangling the impact of fiscal decentralization on economic growth. Working Paper Series, IDB-WP-1037, Inter-American Development Bank, Washington, DC, 127, 104742. DOI: 10.18235/0001899

Cohen, J. (1988). The effect size. Statistical power analysis for the behavioral sciences, 2(1), 77-83.‏

Egger, M., Smith, G. D., Schneider, M., & Minder, C. (1997). Bias in meta-analysis detected by a simple, graphical test. Bmj, 315(7109), 629-634. DOI: 10.1136/bmj.315.7109.629

Faizullah, Z., & Malik, Z. K. (2021). The Dynamic Effect of Fiscal Decentralization on Economic Growth: Role of Governance and Macroeconomic Stability. Global Economics Review, VI, 105-116. DOI: DOI: 10.31703/ger.2021(VI-IV).09

Ghaffary fard, M., sadeghi shahdani, M., komijani, A., & zahedei vafa, M. H. (2014). The Effect of Fiscal Decentralization on Economic Growth in Various Provinces of Iran (A Spatial Econometric Approach). Journal of Economic Research and Policies, 22(71), 125-142. [In Persian]. DOI: 20.1001.1.22519092.1391.17.4.1.7

Göcen, S., Bayhanay, A., & Göktaş, N. (2017). Fiscal decentralization and economic growth: Theory and application, MPRA Paper, 84523.

Golkhandan, A., & Mohammadian Mansour, S. (2016). Investigating the Effect of Fiscal Decentralization on Economic Growth in Selected Developing Countries: Two-Step SGMM Approach. Quarterly Journal of Fiscal and Economic Policies, 4(13), 115-142. [In Persian]

Hamzah, M. Z., & Ritonga, J. T. (2004). Fiscal decentralization and economic growth: evidence from selected Muslim countries. Economic Journal of Emerging Markets, 9(2), 109 -116. DOI: 10.20885/ejem.v9i2.615

Harwell, M. (1997). An empirical study of Hedge's homogeneity test. Psychological methods, 2(2), 219.‏ DOI: 10.1037/1082-989X.2.2.219

Havránek, T., Stanley, T. D., Doucouliagos, H., Bom, P., Geyer‐Klingeberg, J., Iwasaki, I., & Van Aert, R. C. M. (2020). Reporting guidelines for meta‐analysis in economics. Journal of Economic Surveys, 34(3), 469-475.‏ DOI: 10.1111/joes.12363

Korotun, V., Kaneva, T., Drepin, A., Levaieva, L., & Kucherenko, S. (2020). The impact of fiscal decentralization on economic growth in Central and Eastern Europe. European Journal of Sustainable Development, 9(3), 215-215. DOI: 10.14207/ejsd.2020.v9n3p215

Meriem, M., El Hassan, T., & Ayman, B. M. (2017). Fiscal decentralization and economic growth in emerging and developing countries. Revista de Estudios Fronterizos del Estrecho de Gibraltar, (5), 1-1.‏

Mohammadi, N., Haji, G., Fotros, M. (2020). The Impact of Combined Fiscal Decentralization on Economic Growth in Proviences of Iran. Economic Growth and Development Research, 10(38), 75-98. [In Persian] DOI: 10.30473/egdr.2019.46573.5221

Murshed, M. (2015). Fiscal Decentralization and Regional Economic Growth in Sumatera, Indonesia. Economic and Community Development, work paper, 1-41.

Nissen, S. B., Magidson, T., Gross, K., & Bergstrom, C. T. (2016). Publication bias and the canonization of false facts. Elife, 5, e21451.‏ DOI: https://doi.org/10.7554/eLife.21451

Ortiz, A. F. H., Camacho, E. C., Rojas, J. C., Camacho, T. C., Guevara, S. Z., Cuenca, N. T. R., ... & Malo, R. G. (2021). A practical guide to perform a systematic literature review and meta-analysis. Principles and Practice of Clinical Research, 7(4), 47-57.‏ DOI: 10.21801/ppcrj.2021.74.6

Putri, R. N. H., & Saputra, S. P. M. A. (2019). Decentralization and Financial Local Governments Performance: How Does Fiscal Autonomy Affect Spending, Economic Growth, and Poverty in East Java Indonesia? Journal of Poverty, Investment and Development, 59, 1-13. DOI: 10.7176/JPID/51-04

Saedi, N., habibi, F., & Ghaderi, S. (2019). Investigation the Effect of Fiscal Decentralization on Economic Growth in Provinces Iran Using Spatial Econometric. The Journal of Economic Studies and Policies, 6(1), 195-224. [In Persian]

Song, F., Parekh, S., Hooper, L., Loke, Y. K., Ryder, J., Sutton, A. J., & Harvey, I. (2010). Dissemination and publication of research findings: an updated review of related biases. Health technology assessment, 14(8), 1-220.‏ DOI: 10.3310/hta14080

Stojcic, N., & Tolic, M. S. (2019). Direct and Indirect Effects of Fiscal Decentralization on Economic Growth. Ekonomicky Casopis, 67(3), 280-306.

Szabo, S. R. (2017). The Empirical Relationship between Fiscal Decentralization And Economic Growth: A Review Of Variables, Models And Results. Management Research and Practice, 9(2), 47-66.

Thanh, S. D., & Canh, N. P. (2020). Fiscal decentralization and economic growth of Vietnamese provinces: The role of local public governance. Annals of Public and Cooperative Economics, 91(1), 119-149. DOI: 10.1111/apce.12255

Ting, K. Y. (2018). Fiscal Decentralization and Economic Growth in EU Countries: Role of Institutional Mechanisms.‏ UNIVERSITY COLLEGE LONDON, School of Slavonic and East European Studies.

Zhang, Q. (2020). Fiscal Decentralization and Economic Growth: A New Look through the Efficiency Channel and the Market-Preserving Channel (Doctoral dissertation, The George Washington University).

Economics Research

The Impact of Fiscal Decentralization on Economic Growth: A Multilevel Meta-Analysis Approach

References

References

Volume 22, Issue 86 - Serial Number 3
October 2022
Pages 37-82

The Impact of Fiscal Decentralization on Economic Growth: A Multilevel Meta-Analysis Approach

References

References

Volume 22, Issue 86 - Serial Number 3October 2022Pages 37-82

Volume 22, Issue 86 - Serial Number 3
October 2022
Pages 37-82