Fiscal decentralization and economic growth

Fiscal decentralization may indeed have a direct impact on economic growth but the theoretical underpinnings for this relationship remain largely undeveloped. A fair summary of the empirical search for a direct relationship between fiscal decentralization and economic growth is that it remains an open question. Much less attention has been devoted in the literature to the indirect channels through which fiscal decentralization may affect economic growth. We argue that much work remains to be done before policy advisors and decision makers can formulate and implement decentralization programs on the basis of improving the rate of economic growth. (C) 2003 Elsevier Ltd. All rights reserved.