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It is often debated among economists whether the efficiency of sub-national governments is different and better for the provision of services than that of national governments. Most of the previous studies show that fiscal transfers increase the responsibilities of sub-national governments and enhance the ability for revenue generation. The main focus of this study is to analyse the relationship between human development and fiscal decentralisation; to find out the channels through which decentralisation stimulates the pace of economic growth and affects the provision of health and education facilities across the provinces. By using econometric time series techniques for empirical analysis, we find that there exists a long-run relationship between fiscal decentralisation and human development along with urbanisation. Results suggest that the effectiveness of fiscal decentralisation can increase human development; it also strengthens the federation by creating harmony among the provinces.

Impact of Fiscal Decentralisation on Human Development: A Case Study of Pakistan