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Atif Muhammad

Fiscal decentralization means shifting of authority and responsibility to the sub-level governments with regard to decision-making on distribution of financial resources. This also includes the powers to raise local revenue. The main objectives of Fiscal decentralization include efficient utilization of resources, effective service delivery, macroeconomic stability and economic growth

Fiscal decentralization leads to the integration of provinces and enhances their participatory role in the economic development of a country. Financial autonomy reduces the wasteful utilization of resources by the central government. (Bird and Smart 2002) Pakistan has centralized taxation system. The major portion of revenue is collected by the central government, which is then distributed among the provinces to remove financial disparities

The research study attempts to examine the Impact of Fiscal decentralization on Economic growth of Pakistan.



Akai and Sakata (2002).

Davoodi and Zou (1998)

Fiscal decentralization contributes to economic growth Decentralization and Economic Growth:A Cross-Country Study

Xhie and Zou (1998)

Philips and Woller (1997)

Fiscal Decentralization and Economic Growth in the United States

Fiscal Decentralization Leads to EconomicGrowth?.



Fiscal Decentralization and Economic Growth in High IncomeOECD Countries

Thieban (2001)

Anwar Shah (2006)

Perspectives on the Design of Intergovernmental Fiscal Relations

Fiscal decentralization
Gross fixed capital formation Tax to GDP ratio

Economic Growth

GINI coefficient

Economic Growth(LYP). Will be measured in per capita Log of per capita gross domestic product(LYP) Fiscal decentralization(PRFR) is captured on the ratio of Provincial share in Total Revenue to the Total Revenue(PRFR). Gross Fixed Capital Formation (GFCF) Represent the total investment and data is taken from Pakistan Economic Survey Tax-To-GDP Ratio (GFCF): taxes / LYP

GINI Coefficient(GINI): calculate income equality and its source is UNDP Human Development Report.

To find the impact of fiscal decentralization on economic growth of pakistan checking the relation of Economic Growth with: Gross Fixed Capital Formation (GFCF Tax-To-GDP Ratio (GFCF) GINI Coefficient(GINI).

H1: fiscal decentralization has significant impact on economic growth H2: Income inequality has significant impact on Economic growth H3: Investment has significant impact on economic growth

Data type For the purpose of studying the relationship between Fiscal decentralization and economic growth , secondary data is being utilized. Sources of data Issues of Economic survey of Pakistan World Development Indicators Ten years in Pakistan Statistics(1983) UNDP Human Development Report,2007.
Time period 2000-2010

LYP = B0 + 1 PRFR + 2 TGDP+ 3 GFCF + 4 GINI +e

M odel of Davoodi and Zou (1998).

Eview 6.0 will be used for estimation