Fiscal decentralisation and economic growth in Pakistan

Abstract

The impact of fiscal decentralisation on economic growth is a widely-debated topic in the development literature. Economists and policy-makers are of the view that the decentralisation of a nation's fiscal structure is an effective strategy to promote economic growth and to accelerate the pace of economic development. This study analyses the impact of fiscal decentralisation on economic growth of Pakistan for the period 1971-2005. We employed econometric time-series technique for the empirical data analysis. The results suggest that fiscal decentralisation has a positive impact on economic growth. It is concluded that at the early stage of development, central government is in a better position to tackle fiscal responsibilities. Moreover, it is also concluded that if the shares of provincial government expenditures and revenues rise continuously, then it can slow down the pace of economic growth.