A TWO-WAY CAUSALITY BETWEEN LOCAL GOVERNMENT TAX REVENUE AND ECONOMIC GROWTH VARIABLES ON THE BASIS OF FISCAL DECENTRALIZATION AND FISCAL EQUALIZATION: SOME FISCAL AUTONOMY ANALYSES FOR THE SELECTED OECD COUNTRIES

This study examines the existence and direction of the panel causality between different fiscal decentralization and economic growth variables. The well-known theoretical and empirical literature has assumed that the fiscal decentralization process somehow causes economic growth, but has mostly ignored the possibility of economic growth can cause and change the decentralization levels as well. With its different point of interest, methodology and samples; the study applies the Bootstrap Panel Granger Causality Test to the data from 18 countries between 1991–2015 and finds that both fiscal decentralization and economic growth causes each other in different countries with relatively significant levels. According to the results, the tested variables of fiscal decentralization cause GDP and GDP per capita growth in Canada, France and Japan while in Hungary, Poland and Australia ‘vice versa’ effect happens. Further to that, some fiscal policy assessments are also done as a conclusion for the countries (like Turkey) which fiscal decentralization has no or less effect in either way