Public Sector Economics (Jun 2023)

Fiscal decentralization and economic growth: evidence from Brazilian states

  • Pedro Jorge Holanda Figueiredo Alves,
  • Jevuks Matheus Araujo,
  • Ana Karolina Acris Melo

DOI
https://doi.org/10.3326/pse.47.2.5
Journal volume & issue
Vol. 47, no. 2
pp. 255 – 280

Abstract

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This paper investigates the relationship between fiscal decentralization and economic growth in Brazilian states from 1996 to 2015. Using five decentralization measures and the GMM-System model to address the endogeneity problem, we have identified a positive relationship between the indicators of fiscal decentralization and economic growth and observed that the industry and service sectors are the most affected by this decentralization. Our results suggest that local governments with more autonomy make states more efficient, thus increasing economic growth.

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