Fiscal decentralization contributes to economic growth: evidence from state-level cross-section data for the United States

This paper provides new evidence that fiscal decentralization contributes to economic growth, in contrast to previous studies that have denied such a contribution. Our new state-level data for the United States enable us to estimate the effect of fiscal decentralization more objectively than previously, because the data set exhibits little cultural, historical, and institutional variation. We also provide the finding that the definition of fiscal decentralization is important in relation to the effect of fiscal decentralization on economic growth. (C) 2002 Elsevier Science (USA). All rights reserved.