FISCAL DECENTRALISATION AND ECONOMIC GROWTH

Iftikhar AHMAD*

This study discusses the impact of fiscal decentralisation on economic growth to have an indepth analysis of different policies that are in practice for decentralisation. This study makes it obvious that mere decentralisation is not enough; the equally important matter is how to decentralise? In this context, the empirical evidence suggests that fiscal decentralisation can impact economic growth in the long-run only when provinces are allowed and incentivised for higher own source revenue generation. On the other hand, higher federal transfer (another important source of fiscal decentralisation) only had short-run implications for the economic growth in the case of Pakistan. This finding should attract policymakers’ attention while assessing the NFC awards in Pakistan.

Keywords: Fiscal Decentralisation, NFC Award, Pakistan, General-to-Specific (Gets) Approach, ADL Technique.