Entrepreneurial Action, Public Policy, and Economic Outcomes

Entrepreneurial Action, Public Policy, and Economic Outcomes

New Thinking in Political Economy series

Edited by Robert F. Salvino Jr., Michael T. Tasto and Gregory M. Randolph

Examining the economics of entrepreneurship from the perspectives of productive versus unproductive entrepreneurial behavior and the role of institutions in economic outcomes, the authors in this book seek to advance the research on institutions by providing a simple framework to analyze the broader, long-term consequences of economic policies. They examine the relationship between economic freedom and economic outcomes and summarize empirical evidence and theory. The book also provides practical policy solutions that are based on the authors' cogent analyses.

Chapter 9: Does fiscal decentralization result in a better business climate?

Russell S. Sobel, Nabamita Dutta and Sanjukta Roy

Subjects: business and management, entrepreneurship, economics and finance, austrian economics, politics and public policy, public policy


Previous literature generally finds greater fiscal decentralization associated with faster economic growth. A separate, but related, literature finds greater fiscal decentralization associated with improved government performance, and stronger constraints on the Leviathan behavior of governments. Because economic growth critically depends on the presence of good government policies and institutions, the likely but untested link between these two strands of literature is that greater decentralization probably improves growth because it results in government policies more conducive to entrepreneurship and business success. We test (and confirm) this hypothesis using a variety of business climate measures for the U.S. states.

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