Is Divorce a Solution? Decentralization Effect on Economic Growth in Post-Civil Conflict Countries

Abstract

Abstract Civil conflict is the nation’s most important historical event, and it became more frequent in countries already emerged from previous conflicts. High economic growth, as well as other institutional procedures, is key to break this conflict trap. Thus, the current article explores the role decentralization may play to enhance economic growth in post-civil conflict countries. In order to avoid untrue peaceful cases, the article adopted a strict criterion of post-conflict periods, leading to a small dataset. Distinguishing between two forms of decentralization and using two equations with different techniques, the article finds a hampering effect of fiscal decentralization on economic growth in countries emerging from civil conflicts, while it finds insignificant mixed effects of political decentralization. These findings support the distinction made between the real de facto decentralization and the official de jure one. They validate the belief that although central authorities in many countries pretend to apply decentralization, they limit its effectiveness by some legal procedures creating “fake” decentralization.