Is Fiscal Decentralization Growth Enhancing? A Cross-Country Study in Developing Countries over the Period 1990–2014
Round 1
Reviewer 1 Report
a) Include the period 1990–2014 in the title.
b) Include source and year in the Table 1 (also in the bibliographical references).
c) Include source and year in the Table 2 (also in the bibliographical references).
d) Include source and year in the Table 3 (also in the bibliographical references).
e) Include source and year in the Table 4 (also in the bibliographical references).
f) Include source and year in the Appendix A (also in the bibliographical references).
g) Could table 4 be reduced so that it does not take up so much space? Or put it horizontally?
h) ¿Author Contributions: Not applicable?
i) The author/s could cite this works:
- The political economy of rent-seeking: Evidence from Spain’s support policies for renewable energy
- The spanish energy transition into the eu green deal: Alignments and paradoxes
- Private property rights, dynamic efficiency and economic development: An Austrian reply to neo-marxist scholars nieto and mateo on cyber-communism and market process
- Disclosure and comparability of the on-line economic-financial information: Iberoamérica case
Author Response
Point 1: a) Include the period 1990–2014 in the title.
Response 1: I agreed with these comments and suggestions and thus, I already added “over The Period 1990-2014”.
Point 2: b) Include source and year in the Table 1 (also in the bibliographical references).
Response 2: I agreed with these comments and suggestions and thus, I already added source and year in the Table 1.
Point 3: c) Include source and year in the Table 2 (also in the bibliographical references).
Response 3: I agreed with these comments and suggestions and thus, I already added source and year in the Table 2.
Point 4: d) Include source and year in the Table 3 (also in the bibliographical references).
Response 4: I agreed with these comments and suggestions and thus, I already added source and year in the Table 3.
Point 5: e) Include source and year in the Table 4 (also in the bibliographical references).
Response 5: I agreed with these comments and suggestions and thus, I already added source and year in the Table 4.
Point 6: f) Include source and year in the Appendix A (also in the bibliographical references).
Response 6: I agreed with these comments and suggestions and thus, I already added source and year in the Appendix A.
Point 7: g) Could table 4 be reduced so that it does not take up so much space? Or put it horizontally?
Response 7: I could not agree with this suggestion as reducing the row and column will make the readers miss a lot of information. Moreover, suppose if I design the table horizontally, it will make my table becomes wider.
Point 8: h) Author Contributions: Not applicable?
Response 8: I eliminated authors contributions since I am the sole author.
Point 9: i) The author/s could cite this works:
- The political economy of rent-seeking: Evidence from Spain’s support policies for renewable energy
- The spanish energy transition into the eu green deal: Alignments and paradoxes
- Private property rights, dynamic efficiency and economic development: An Austrian reply to neo-marxist scholars nieto and mateo on cyber-communism and market process
- Disclosure and comparability of the on-line economic-financial information: Iberoamérica case
Response 9: Many thanks for these suggestions and comments. However, those articles do not relevant to my research focus. Instead, I added Huynh and Tran (2021), Filippetti and Sacchi (2016), Ponce-Rodriguez et al. (2018) in the analysis.
Author Response File: 
Author Response.docx
Reviewer 2 Report
This paper studies the fiscal decentralization–growth nexus regarding institutional quality in 24 developing countries over the period 1990–2014. This is an interesting paper on an issue tat requires more attention in the literature which is the role of political institutions, fiscal (de)centralization and growth. The analysis is appropriately done. Author(s) consider several issues (such as endogeneity) in their analysis and the empirical analysis in my opinion is credible. In summary, this is an interesting paper that contributes to the literature on the role of political institutions, fiscal de (centralization and growth.
Comments to Author(s)
- In the paper author(s) emphasize the argument of Riker (1964) about the role of political accountability. The paper should include in the literature review recent analysis that considers political integration as a mechanism to coordinate policies of local governments. This mechanism allows the internalization of externalities from local public good which enhances efficiency and could promote higher growth. The references to include are:
- Raúl A Ponce-Rodríguez, Charles R Hankla, Jorge Martinez-Vazquez, Eunice Heredia-Ortiz, Rethinking the Political Economy of Decentralization: How Elections and Parties Shape the Provision of Local Public Goods, Publius: The Journal of Federalism, Volume 48, Issue 4, Fall 2018, Pages 523–558,
And for similar analysis across electoral systems:
Hankla, C. J. Martínez Vazquez y R.A Ponce Rodríguez, (2019), Local Accountability and National Coordination in Fiscal Federalism: A Fine Balance, Edward and Elgar Publishing, London UK.
- Author(s) should elaborate more about the contribution of this paper to the literature. What is different from the existing literature. I know they do this to an extent in the literature review. But making a clearer distinction of how their empirical results are different from the existing literature would help to clarify the contribution of the paper.
- The paper tries to deal con endogeneity between growth and political institutions and fiscal decentralization which makes their empirical analysis credible.
- Author(s) should provide a more detailed explanation (discussion) of this result:
“Moving to other metrics of institutional quality, in columns (6) to (9) and (15) to (18), 347 my finding shows that all indicators of institutional quality have a negative and insignificant effect on growth in developing countries when they conduct fiscal autonomy and 349 control.”
Author Response
Point 1: In the paper author(s) emphasize the argument of Riker (1964) about the role of political accountability. The paper should include in the literature review recent analysis that considers political integration as a mechanism to coordinate policies of local governments. This mechanism allows the internalization of externalities from local public good which enhances efficiency and could promote higher growth. The references to include are: Raúl A Ponce-Rodríguez, Charles R Hankla, Jorge Martinez-Vazquez, Eunice Heredia-Ortiz, Rethinking the Political Economy of Decentralization: How Elections and Parties Shape the Provision of Local Public Goods, Publius: The Journal of Federalism, Volume 48, Issue 4, Fall 2018, Pages 523–558,
And for similar analysis across electoral systems: Hankla, C. J. Martínez Vazquez y R.A Ponce Rodríguez, (2019), Local Accountability and National Coordination in Fiscal Federalism: A Fine Balance, Edward and Elgar Publishing, London UK.
Response 1: I agreed with these comments and suggestions and thus, I already added Ponce-Rodriguez et al. (2018) in the analysis. They conduct a political economics analysis of the provision of local public goods, taking into account the combined influence of democratic (de)centralization and party (de)centralization. In nations with centralized parties, a system of elected local governments outperforms a centralized structure of government, even when local public goods have inter-jurisdictional spillovers. Indeed, a major conclusion of their theoretical model is that the combination of democratic decentralization and party centralization tends to generate the best effective provision of public goods. The former ensures that local governments respond to the aspirations of their residents, whereas the latter motivates local leaders to spend for items that may have spillover advantages. They also show that establishing the locally elected governments can only be expected to improve public goods distribution when parties are centralized or when there are no inter-jurisdictional spillovers. Local governments governed by decentralized parties are unlikely to offer public goods that spill over into nearby constituencies. To summarize, their approach emphasizes the role of political institutions in deciding how efficient fiscal decentralization outcomes (i.e., economic growth) are.
Point 2: Author(s) should elaborate more about the contribution of this paper to the literature. What is different from the existing literature. I know they do this to an extent in the literature review. But making a clearer distinction of how their empirical results are different from the existing literature would help to clarify the contribution of the paper.
Response 2: I agreed with these comments and suggestions and thus, I already added several explanations in the analysis.
Point 3: The paper tries to deal con endogeneity between growth and political institutions and fiscal decentralization which makes their empirical analysis credible.
Response 3: Many thanks for this comment. For sure, endogeneity is one of the issue that needs to be addressed in this paper.
Point 4: Author(s) should provide a more detailed explanation (discussion) of this result: “Moving to other metrics of institutional quality, in columns (6) to (9) and (15) to (18), 347 my finding shows that all indicators of institutional quality have a negative and insignificant effect on growth in developing countries when they conduct fiscal autonomy and 349 control.”
Response 4: I agreed with these comments and suggestions and thus, I already added explanations to response your concern.
Reviewer 3 Report
I do not find that the presented paper would bring any significant contribution to the scientific knowledge from theoretical or methodological points of view. Indeed, the paper reviews quite old literature (the newest source is from 2019 and just the only one from the recent five year period), and it seems that the most recent contributions in this field are ignored. Although the paper uses the interaction between two quantitative variables, the meaningful conditional slope coefficients (showing how FD effect on growth changes over the range of observed values for the variables used to proxy IQ) are not calculated and graphicly presented along with C.I. (review Brambor, T., Clark, W. R., & Golder, M. (2006). Understanding Interaction Models: Improving Empirical Analyses. Political Analysis, 14(1), 63–82. http://www.jstor.org/stable/25791835 for the information about formulas to calculate conditional standard errors and thus C.I. for the composite slope coefficient). To conclude, I do not think that this paper is deepening our understanding of growth sources and the role of institutions as one of the main contributors and mediators.
Author Response
Dear Reviewer
I attach some responses related to your concerns.
Thanks
Author Response File: 
Author Response.pdf
Reviewer 4 Report
In this work, the authors analyze the fiscal decentralization–growth nexus regarding institutional quality in 24 developing countries over the period 1990–2014. Good empirical work. However, some issues should be addressed before publication.
- The main findings in the Abstract are too short, please add more related contents about your main findings.
- In the Introduction, the authors try to explain their contributions. However, it is not clear for readers, please further clearly state your contributions. Maybe a separate paragraph is needed.
- The literature review about fiscal decentralization is not comprehensive. I guess the authors may be benefitted from the following article: https://doi.org/10.1016/j.eneco.2020.105060 and https://doi.org/10.1016/j.renene.2022.01.064.
- For the data, why just end in 2014? It seems too old, please explain it.
- The discuss part is too simple. Please add more contents to further discuss your main findings, which is very important for the readers.
- Some policy suggestions should be highlighted based on your main findings.
Author Response
Dear Reviewer
I attach some responses related to your concerns.
Thanks
Author Response File: Author Response.pdf
Round 2
Reviewer 3 Report
I do not find that authors seriously address my concerns regarding the multiplicative terms in their specifications. Considering that multiplicative terms play a key role in the research they should be properly analysed following my recommended literature. First, the relationship between factor and outcome variable must be presented over the observed values of the mediator (showing the conditional nature of the relationship and conditional slope coefficient). Second, C.I. must be presented along with the conditional slope coefficients, since not just the relationship (the slope coefficient) but standard error associated with it is conditional as well (to be able to see what level of the mediator is required for the effect to be significant and positive/negative). Third, It can be done graphicly.
Author Response
Point 1: I do not find that authors seriously address my concerns regarding the multiplicative terms in their specifications. Considering that multiplicative terms play a key role in the research they should be properly analysed following my recommended literature. First, the relationship between factor and outcome variable must be presented over the observed values of the mediator (showing the conditional nature of the relationship and conditional slope coefficient). Second, C.I. must be presented along with the conditional slope coefficients, since not just the relationship (the slope coefficient) but standard error associated with it is conditional as well (to be able to see what level of the mediator is required for the effect to be significant and positive/negative). Third, It can be done graphicly.
Response 1: Many thanks for your comments and suggestions. I just read two papers related to the multiplicative extensively. The recommendations given in Brambor, Clark, and Golder (2006) have been highly cited. They recommend that scholars should (1) include in the model all constitutive terms alongside the interaction term, (2) not interpret the coefficients on the constitutive terms as unconditional marginal effects, and (3) compute substantively meaningful marginal effects and confidence intervals. Meanwhile, Hainmueller, Mummolo, and Xu (2018) contend that the current best practice guidelines for using multiplicative interaction models fail to address key issues, especially in the common scenario where at least one of the interacted variables is continuous. However, both studies confirm that the current best practice guidelines cannot help with other common problems such as endogeneity (in this case, growth can also affect fiscal decentralization and institutions) that often plague inferences from regression models and can often only be solved through better research designs (in this case, GMM).
Reviewer 4 Report
I believe the authors have answered my questions well, thus I recommend to publish this manuscript.
Author Response
Response to Reviewer 4 Comments
Point 1: I believe the authors have answered my questions well, thus I recommend to publish this manuscript.
Response 1: Many thanks for your comments, thus I will leave the decision to the editorial board.
