Horizontal Fiscal Decentralization and Economic Growth: A Canadian Study

Abstract

This study analyzes the impact of horizontal fiscal decentralization on local economic growth as measured by population, employment and real income. The analysis replicates a U.S. study using Canadian data for Census Divisions. The findings show that horizontal fiscal decentralization of general purpose government units in nonmetropolitan areas have a negative effect on population, employment and income growth no significant impact on economic growth in metropolitan areas. The results suggests that municipal reforms in the 1990s may have impacted economic growth in nonmetropolitan and metropolitan Census Division differently.