Contribution of fiscal decentralization to economic growth: Evidence from Pakistan

Pakistan is an underdeveloped economy having not remarkable growth rate. There may be many sources of economic growth but present study focuses on the fiscal decentralization as the major source of economic growth. Fiscal decentralization improves the efficiency of the Public sector and its leads to economic growth. The analysis is based on the time series annual data covering the period 1972 – 2009. Autoregressive model is used for ordinary least square estimation. The findings show that the both fiscal decentralization variables like spending authority and revenue autonomy have positive and significant impact on economic growth. The study concludes that the federal government should delegate the fiscal power to provincial and local governments for raising the growth and welfare of the people of Pakistan