Fiscal decentralization and regional economic growth: the case for the Philippines
Date
2016-12
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
In the past years, there has been an increasing policy trend towards fiscal
decentralization, especially in developing countries. This practice is expected to promote
rural economic development by increasing government efficiency and responsiveness,
and for that reason, it became the subject of many empirical studies. However, the
existing theoretical and empirical discussions which address the question whether
decentralization accelerates economic growth portray mixed results.
This study aims to fill this gap by measuring the effect of fiscal decentralization in
regional economic growth in the context of the Philippine economy using the different
measures of decentralization introduced by Uchimura and Suzuki (2009) and another
innovative measure by the researchers.
Using fixed effects model in the empirical analysis of the Philippine regions from
2001 to 2011, excluding National Caspital Region (NCR) and Autonomous Region of
Muslim Mindanao (ARMM), this paper demonstrates that increasing the capabilities of
the local government units to self-generate their sources of revenue and their fiscal
autonomy until it reaches its optimal level of decentralization have a positive effect on
regional economic growth. Moreover, among all the measures of fiscal decentralization,
revenue decentralization has the largest economic significance which suggests its
important role on regional growth.
Description
Keywords
decentralization, economic growth, Philippines