Paper/Speech Details of Conference Program for the 26th NISPAcee Annual Conference Program Overview V. Public Finance and Management Author(s) Elena Cigu University "Alexandru Ioan Cuza" Iasi Iasi Romania Bilan Irina, Title How relevant is Fiscal Decentralization for Economic Growth? The Case of EU Countries File Paper files are available only for conference participants, please login first. Presenter Elena Cigu Abstract Subnational governments are no longer seen as just state institutions under the influential neo-liberal arguments, but as increasingly fostering dynamic partnerships with the civil society and the private sector to improve the quality of service delivery, to enhance social responsibilities and to ensure the broad participation of citizens in decision-making and feedback on public service performance. A functioning subnational government system requires a successful administrative and fiscal decentralization. Over the last years, the EU countries continued the reforms to decentralize fiscal powers to subnational governments and it became increasingly important to understand the various effects of the fiscal decentralization policy, especially on economic growth. Even though the literature offers a number of hypotheses on the relationship between fiscal decentralization and economic growth, there is mixed practical evidence among countries. This study analyses the effects of fiscal decentralization on economic growth in the EU countries. We firstly aim to provide a theoretical approach on this relationship, by reviewing the most relevant studies in this area. Then, we develop a linear regression model for evaluating the effects of fiscal decentralization on local economic growth and apply it for the case of the EU countries from 2006 to 2014, period broadly covering the pre-crisis, crisis, and post-crisis conditions. To control for heterogeneity, we use the fixed effects estimation technique for panel data models. The results show that the variations in economic growth in our countries are sufficiently explained by the variables in the model. We recommend a coherent and sustained continuation of the process of decentralization, which will lead to a better quality and efficiency of public services. In this way, subnational governments will be able to improve their response to the requirements of citizens, local development, and economic growth. Keywords: subnational governments, fiscal decentralization, economic growth, economic crisis JEL Classification: H7, O4, O47
