Assessment of Fiscal Decentralization Influence on Social and Economic Development

Abstract

Testing the hypothesis of FD's positive influence on different parameters of social and economic development was realized on the base of panel data analysis for the set of European countries (Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Macedonia, Moldova, Montenegro, Romania, Serbia, Slovenia, Turkey and Ukraine). Methodologically it was realized through the using of panel data regression model (independent variablesmeasures of fiscal decentralization, dependent variablesmeasures of social or economic development) in Stata 12/SE. This research allowed to confirm the hypothesis on positive impact of different measures of fiscal decentralization on GDP, GDP growth rate, foreign direct investments, and social contributions. Nevertheless, negative impact of fiscal decentralization on GNI per capita and export of goods and services was found. Besides, increase of public finance centralization stimulates inflation. There was identified controversial impact of different parameters of fiscal decentralization on dynamic of import of goods and services, accordingly.