Contribution of Fiscal Decentralization to Economic Growth: Evidence from Pakistan

Abstract

Pakistan is an underdeveloped economy having not remarkable growth
rate. There may be many sources of economic growth but present study
focuses on the fiscal decentralization as the major source of economic
growth. Fiscal decentralization improves the efficiency of the Public
sector and its leads to economic growth. The analysis is based on the
time series annual data covering the period 1972 – 2009.
Autoregressive model is used for ordinary least square estimation. The
findings show that the both fiscal decentralization variables like
spending authority and revenue autonomy have positive and significant
impact on economic growth. The study concludes that the federal
government should delegate the fiscal power to provincial and local
governments for raising the growth and welfare of the people of
Pakistan.