ABSTRACT
The strongest strand of comparative research with an interest in the policy consequences of federalism has concentrated not on the economy, but on the growth of the welfare state and public expenditure. In a series of empirical studies now going back more than two decades, this literature has identified the weak development of the public sector and the welfare state in federal nations (Wilensky 1975; Cameron 1978; Castles and McKinlay 1979) and in those with constitutional structures containing many veto-points to centrally initiated policy reform (Huber et al. 1993; Schmidt 1996; Castles 1998). By contrast, despite a real theoretical interest in the possible macro-economic policy consequences of constitutional and fiscal decentralization, the fact that the topic sits astride the demarkation line between political science and economics has not been conducive to the emergence of any substantial body of empirical research findings. Such a research effort is vastly beyond the scope of one short chapter, so the goal here is an exploratory one. In what follows, I seek to establish whether the evidence is such as to provide the basis of a prima facie case for a correspondence between a nation’s degree of political and/or fiscal decentralization and its economic performance. Clearly, the stronger the case, the greater the need for further research.
