Scottish Economic Growth

Introduction

There has been considerable discussion in recent weeks in Scotland concerning the drivers of economic growth, and in particular the role and importance of greater fiscal autonomy (FA) as a means to achieving a higher growth rate. This briefing note, as a contribution to the debate, covers the following: A brief overview of what economists generally believe are the key drivers of growth for a small, open economy like Scotland, so allowing us to place the debate on FA within this wider context; A consideration of the evidence from a review of the literature on whether FA actually results in greater growth. Here we try to give as balanced a picture as possible and end up by concluding that at best the jury is out on this issue, and at worst the evidence suggests no clear, precise relationship; If the view is that that FA does deliver economic growth, we ask what is the likely transmission mechanism that links greater FA to growth, and will the economy be positively affected - not only in the longer term (i.e., after 5 years) but in the immediate and short term too? Since, as discussed below, the transmission mechanism is usually not presented we believe it is incumbent upon the proponents of FA to produce the necessary evidence; Lastly, we pose certain questions of those who favour the new fiscal arrangements as set out in the recently published Scotland Bill. For example, will the benefits of introducing the Scotland Bill outweigh any (possibly) considerable short term set up costs? We argue that proponents of this approach should also be expected to produce more detailed evidence for scrutiny.

1. Drivers of Growth

The drivers of economic growth in a small open economy such as Scotland are usually concerned with the long-run determinants of increases in Gross Domestic Product (GDP), and these almost always centre on the factors that determine productivity growth. Productivity (and especially the productivity of both labour and capital inputs into the production process, i.e. total factor productivity, or TFP) is widely recognised as a key driver of long-run economic growth. As the eminent U.S. economist Paul Krugman (1997) noted Productivity isnt everything, but in the long run it is almost everything; while William Baumol similarly states that without exaggeration in the long run probably nothing is as important for economic welfare as the rate of productivity growth (Baumol, 1984). Large-scale country and industry studies tend to confirm the importance of TFP and its dominance in terms of explaining differences in output growth across different 1

economies (e.g., Figure 1.2, OECD, 2003; Figure 6.3, BERR, 2008; Figure 10, Mourre, 2009; Table 2, OMahony and Timmer, 2009). So what factors determine higher levels of productivity? The standard list would include: innovation and R&D, skills, entrepreneurship, and increases in efficiency (e.g. technology transfer allowing catch-up to occur, increases in the quality of labour and capital used in production including greater use of ICT capital, and better management techniques). Indeed the Scottish Governments Economic Strategy (2007) lists productivity (as well as more employment, population growth, and a fairer distribution of resources) as the key challenges faced, with such factors as learning and skills; a supportive business environment (which means fostering more firm involvement in international markets, more development of innovation, increasing R&D, and a competitive tax regime1); infrastructure development; and effective government, all being areas for policy to enhance economic growth.2 The central role of productivity as the single most important factor determining long-run economic growth (and the policies needed to foster higher productivity) recognises the importance and role of knowledge-assets in determining competitiveness, productivity, and ultimately output growth. The use of such intangible assets (which can be defined as knowledge embodied in intellectual assets, such as R&D and proprietary know-how, intellectual property, workforce skills, world-class supply networks and brands) is recognised by academics from various fields, policy-makers, and businesses themselves as a key (some say the key) driver of enterprise performance and thus ultimately aggregate productivity and growth. There are of course other factors that impact on economic growth, beyond the microeconomic determinants of productivity already discussed. The macro-economy (through the overall short- run aggregate demand for goods and services) will also have an important impact, particularly on short-run growth prospects.3 Partly this depends on how recession impacts on demand in the private sector of the economy and partly how governments react to downturns in the business cycle. In the usual boom-and-bust scenario, governments tend to tighten their fiscal stance to stop the economy over-heating, while they spend relatively more in recession to underpin the more fragile demand in the private sector of the economy. The fiscal position Scotland has faced in the last ten years reflects a period of relative boom in both private and public sectors (until 2008), followed by recession, and now fiscal retrenchment to deal with too high a level of public spending vis--vis tax revenues, which have contributed to an unsustainable build-up in public sector indebtedness. So while the first decade of devolution saw an average real terms annual increase in the Scottish Governments budget of over 5%, the second decade is likely to see an average negative real terms annual growth. The Office of the Chief Economic Adviser expects real terms cuts for 6 years after 2009-10 and does not expect Scottish
The 2007 Strategy also makes the point that greater autonomy over policy is necessary to achieve a step-change in Scotlands growth path, and in particular it is stated: devolution of responsibility for economic and fiscal policy would allow a Scottish Government to tailor a tax environment suited to attracting investment to Scotland and funding public services appropriate to the needs of the Scottish people. We pick up this point later when discussing FA and transmission mechanisms. 2 Note, these themes are not very different to the approach of previous Scottish administrations; e.g., the Smart, Successful Scotland (SSS) document (2004) also recognised that the key factors contributing to economic growth are: entrepreneurial dynamism, R&D and innovation; education and skills; infrastructure; and efficient management of public sector resources. SSS stated that its key objectives were to grow businesses (through more innovation and R&D); develop skills to boost human capital; and to foster global connections (both more Scottish firms involved in international markets and through inward investment from overseas companies FDI). 3 Short-run because macroeconomic factors are usually geared to the business cycle, although the current fiscal imbalance faced by many governments belonging to the OECD is likely to lead to a longer period of tight fiscal policy (until or unless economic growth picks up strongly enough to boost tax revenues sufficiently to cover the currently unsustainable level of government spending).
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Government DEL expenditure to regain its 2009-10 real terms level until 2025-26.4 Clearly this reduction in government consumption will impact significantly on overall demand, especially relative to the positive contribution such government consumption made to overall demand in the first decade of devolution. Furthermore, this fall in Scottish Government demand will be reinforced by declines in demand at the UK Government level. There are other perceived drivers of economic growth in the Scottish debate. For instance, there has been some debate over whether smaller countries have greater potential to grow faster than larger countries, largely based on their smallness making them (i) more nimble and so able to react faster to changes in economic conditions, and (ii) having a greater understanding of the needs of the economy by being closer to it. We are not aware of any evidence that supports such a claim, nor for that matter the other way round. It does not appear to be a subject that is particularly well researched. Some commentators claim that smaller governments, achieved through lower taxes, lead to faster economic growth. The OECD give some credibility to this argument,5 although they carefully differentiate between types of government spending that are considered conducive to growth and those (e.g. high levels of direct taxation on wages and profits) that discourage growth. The practical evidence that size of government impacts on growth is more difficult to find. Looking at the record of high vs. low tax economies: For the three leading low tax economies (the USA, Japan and Switzerland) post-1970 the first has a fairly average record of growth, the second did well pre-1990, but badly thereafter, and the third has a consistently poor growth record. By contrast, the record of three of the leading high tax economies (Denmark, Sweden and Finland) is more average, not spectacular but neither suffering the very poor rates seen in Japan of late or in Switzerland. So in conclusion, the traditional drivers of economic growth tend to concentrate on microeconomic factors (such as innovation, R&D, entrepreneurship, and knowledge-based assets in general) as the key determinants of productivity, and thus ultimately long-run prospects. To a large extent, the policy levers available in this area have been within the control of the devolved Scottish Government since 2000. And yet, there has been little debate on where and how Scotland should improve such microeconomic policies i.e., does Scotland have distinctive and effective policies to increase (firm-level) productivity. Instead, the current debate centres on the role and importance of FA and its impact on growth, and it is to this that we now turn before providing some commentary on whether we think FA should be an addition to the list of most important factors likely to impact on long-run productivity and the growth of the Scottish economy.

Outlook for Scottish Government Expenditure, June 2010 Emergency Budget Update, July 2010, Scottish Government, see Chart 13. 5 The Sources of Economic Growth in the OECD countries, 2003, OECD.

2. Fiscal decentralisation and growth

One potential source of helping to achieve a faster growth rate concerns greater fiscal autonomy, or fiscal decentralisation as it tends to be referred to in the academic literature. Both the SNP-led Scottish Government and the Campaign For Fiscal Responsibility (CFFR), launched by Ben Thomson and Jim McColl, have made this argument.6 In both cases they have relied on evidence for their argument that such fiscal decentralisation leads to faster economic growth from a Policy Forum paper in 2010 by Professors Hughes Hallett and Scott (HHS). The latter in turn rely on research from a variety of other papers to make the case for a connection between fiscal decentralisation and economic growth.7 Examination of this material highlights a number of interesting, if tentative, findings. In his most recent paper on this subject Lars Feld (2010), a prime reference in HHSs own paper, reviews the extant literature in this area, finding that: fiscal decentralisation has no robust effect on growth but the evidence hints at a positive effect on overall productivity, conditional on the broader institutional framework, although this seeming conundrum vis--vis the first point is not resolved in the paper; expenditure decentralisation is found to have a potential negative impact on productivity, although this may be a peculiarity of co-operative federalism a meta analysis of single country and cross country studies finds fiscal decentralisation to have no significant effect on growth single country analyses are dominated by China, which is not ideal due to its unique institutional arrangements, and the USA, Germany and Switzerland. Feld concludes that large parts of the world are still un- or under-researched the study offers some greater support to competitive over cooperative8 fiscal decentralisation, although it does not comment on how this fits with Switzerlands overall very low growth rate over the last 40 years. However, it should be noted that while Felds (2010) paper concludes fiscal decentralization has no robust effect on growth, it does go on to discuss other potential benefits from increased political accountability and positive welfare effects; Felds overall view being that federalism allows to realise these positive effects without having to sacrifice economic performance for them. An earlier paper by Feld (2004) is quoted in the HHS (2010) paper to the effect that if expenditure decentralisation increases by 10% then the growth of GDP per capita increases by 1.6-3.2 percentage points (HHS quote). However, such a range is never mentioned by Feld himself and is based on HSSs singling out of 3 single country studies mentioned in Feld, involving China, where
At the launch of CFFR it was claimed that the FA arrangement proposed in HHSs Policy Forum paper could translate to literally billions more in the Scottish economy and that much greater fiscal responsibility would herald the dawn of a new age of economic prosperity for Scotland. 7 It should be remembered that HSS themselves describe their own calculations in the Policy Forum paper as in the best tradition of back of the envelope calculations and they are not claiming any certainty with regards to the outcome. The difference between co-operative and competitive federalism is discussed by the authors using the examples of Switzerland, as a federation with an important role of inter-jurisdictional competition through an exceptionally large degree of sub central autonomy over matters like taxing powers, and Germany, which exhibits co-operative federalism via joint taxes and an extensive fiscal equalisation scheme.
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Feld (op. cit.) finds in general no (or negative) effects and so tends to dismiss the general relevance of the results due to the particular institutional arrangements in place. (Furthermore, the accuracy of Chinese GDP statistics is questionable and they have been subject in the past to very large revisions.) There is one other, allegedly supportive, single country study from Feld used by HHS (based on the USA), although this covers only a 4 year period (1992-1996) and in a later paper the same authors (Akai et. al., 2009) conclude that the empirical studies regarding whether there is a positive or negative relationship between economic growth and fiscal decentralisation are still controversial. Much of the work in this area points to definitional difficulties over decentralisation as well as the importance of institutional arrangements in complicating interpretation of results. Thornton (2007) attempts to distinguish between administrative and substantial decentralisation and finds that when the measure of revenue decentralisation is limited to the revenues over which sub- national governments have full autonomy, its impact on economic growth in OECD economies has not been statistically significant.9 A further, post HHS published, paper by Rodriguez-Pose & Ezcurra (2010) on this subject found a negative and significant association between fiscal decentralisation and economic growth. It also found that administrative decentralisation tended to display a negative connection to economic growth, although this finding was less robust and was sensitive to the definition and measurement of such decentralisation. The work of the Calman Commission and of its Independent Expert Group also rejected any simple connection between greater fiscal decentralisation and higher growth. Like Feld, Calman therefore relies on other benefits e.g., in terms of increased political accountability to make the case for greater fiscal decentralisation. The question of what degree of fiscal decentralisation maximises any such alternative benefits, and how they are measured, is not one where we are able to find much evidence or consensus. Note, the issue of the link between fiscal decentralisation and economic growth has also been covered in great depth by Hallwood and MacDonald. In their most recent writings on this subject (2009) the authors concluded that the fact that empirical evidence produced such a mixed outcome (on the fiscal devolution economic growth link)10 is perhaps to be expected given the rather rudimentary statistical and econometric techniques used and that until the econometric and measurement issues are appropriately addressed, we are unlikely to be able to pin down the true relationship between fiscal decentralisation and economic growth, especially concerning the devolution of increased tax powers. It is perhaps due to the tentative research findings on this topic, which are neither consistent nor robust, that there is a lack of any wider international or official recognition that any such relationship exists. For example, promoting greater fiscal decentralisation is not accepted practice in international circles (e.g., for the International Monetary Fund or the European Central Bank) as a way of increasing the growth rate. Overall, and returning to the question posed at the end of Section 1, the most important finding to take away from this trawl of the literature is that there is no simple and robust relationship between fiscal decentralisation and economic growth. In addition, any such relationship is likely to be obscured by two important difficulties: first, that definitional and data problems are currently significant; and second, that any such impacts may well be dominated by other economic and policy factors and so the precise impact of fiscal decentralisation will be very difficult to discern.

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Note, in their Policy Forum paper HHS imply that Thornton came to the opposite finding. Words in parenthesis have been added by us.

A final point: while much of the debate in Scotland has been over the impact of greater revenue powers to Scotland as a form of greater fiscal decentralisation, the academic work in this area covers decentralisation of both expenditure and revenue powers. Indeed much of the strongest evidence for a potentially positive relationship between FA and economic growth stems from greater decentralisation of expenditure as opposed to revenue powers (something Scotland already has). In this paper we have not gone through the evidence separately for expenditure and revenue decentralisation, although more work in this area may be appropriate given Scotlands existing high degree of expenditure autonomy versus its low degree of revenue raising autonomy. However, our understanding of the literature is that, in general, neither form exhibits a robust relationship in terms of its impact on economic growth. 3. Mechanisms of Transmission There are a variety of possible transmission mechanisms that link FA to growth. In terms of a positive relationship, the most commonly referenced11 mechanisms are: informational advantages arising from more local government, i.e. a better understanding of the needs of local citizens for public goods and services; greater production efficiency triggered by greater competition among devolved governments and the policy innovation that this engenders; benefits when diseconomies of scale exist; increased participation, transparency and accountability in policy making which can generate greater trust, interaction and networking, i.e. increased social capital. On the other hand, such benefits can be negated or overturned by: the lack of divergence in needs and wants for public goods and services across jurisdictions; even if such needs diverge, the lack of any informational gains at local level that can help address them; the loss of economies of scale; complicating macroeconomic policy coordination, especially the implementation of stabilisation policies; inadequate expertise and human resources leading to special interest capture and clientelism, i.e. as has been mooted with regards to recent events in Ireland and Iceland. The overall positive or negative economic effects of FA cannot be established using theory alone, nor, as we have seen, through existing empirical results. This may not be a surprising finding given how the various transmission mechanisms might work based on: different forms of FA; local/national government size; and institutional structures. While section 2 suggests that more work needs to be undertaken to understand what sort of relationship exists in practice between FA and economic growth, this section emphasises the importance of knowing which of a variety of transmission mechanisms is the most vital in making
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See for example, Rodriguez-Pose & Ezcurra (2010), Hallwood &MacDonald (2009), Feld & Schnellenbach (2010)

any such relationship work. We believe it is important (and incumbent on those who advocate greater FA) to map out the specific links between FA and economic growth, as this will then assist further empirical work on the extent to which such links exist (and how strong they are), and how policy can be formulated to maximise the benefits of more FA. Corporation Tax One of the most specific ways that greater tax revenue autonomy might improve the economic growth rate relates to the ability to alter, or more specifically to reduce, the rate of corporation tax in Scotland. This position has been put forward by the current Scottish Government as well as by Hallwood & MacDonald (2009, Chapter 10) who state that lowering corporation tax by 10 per cent can increase the growth rate of real GDP by between 1 and 2 per cent per year. The evidence for this relationship rests on a paper by Lee & Gordon (2005) covering 70 countries over 1970-1997. However, Lee & Gordons findings were brought into question in a subsequent paper by Angelopoulos et al (2007) who, when they restricted the dataset to the 23 more developed countries over the period 1970 to 2000 found a positive (or no) relationship (depending on the specification) between corporation tax and growth. This is a finding similar to previous work on OECD countries (Widmalm, 2001). Others have found that lower taxes attract inward foreign direct invest (FDI), but the impact is small unless tax rates are set at (very) low levels.12 And if this is done, then it raises the issue of where lost tax revenues should be recouped, unless the impact on other taxes (such as income tax) from the extra inward FDI are sufficient to offset the decline in corporation tax as applied to all Scottish companies. There is also the issue of EU state aid rules to consider. These state that while national governments (like the UK) are allowed to operate differential rates of corporation tax across different areas within the country, this however must be matched by a compensatory reduction in the level of subsidies provided to such areas (i.e. the overall fiscal impact for the beneficiary areas must be zero). This issue is very much live in Northern Ireland at present. In Scotland it may be complicated by the impact of North Sea revenues on assumed subsidy levels (i.e., whether corporation tax levied on North Sea Oil are deemed part of Scottish or UK revenues). Hallwood & MacDonalds second argument relates to the ability of Switzerland to attract international companies through their low corporation tax regime. Even if low(er) levels of corporation tax has helped Switzerland attract additional levels of FDI, it has not helped Switzerland achieve a fast growth rate as it has had the lowest growth rate amongst developed OECD economies over the last 4 decades. To sum up on the corporation tax question, the evidence is again inconclusive over its impact on economic growth. This should not come as a shock as many inward investors and potential entrepreneurs will want to take into account a variety of taxation related issues, including the overall tax burden and the stability of any tax regime, when making investment decisions. Indeed
Azmar (2010) reports that on average, a 1% increase of the tax rate significantly (95% level of confidence) decreases U.S. capital (inflows) by 5% when ATR (the average tax rate) is between 0 and 10%, by 1.7% when ATR is between 10% and 20%, by 0.8% when ATR is between 20% and 30%, and by 0.5% when ATR is between 30% and 40% (p.244).
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a recent PriceWaterhouseCoopers report (2011) found that overseas investors already in the UK, rank corporation tax as 17th in a list of investment drivers. 4. Comparing known and unknown costs and benefits While we have seen the difficulties inherent in understanding the economic and financial benefits that might accrue from greater FA, on the costs side there is one area where greater certainty should be possible: i.e., the direct costs of introducing greater FA. This involves greater collection costs for the government and greater compliance costs for individuals and companies. The Scotland Bill includes an impact assessment (IA) that outlines some of these costs associated with the measures as currently proposed in the Bill. In total it is estimated the enabling legislation will cost 45 million over 7 years or around 4.2 million per annum (2011 prices). Within this, the HMRC set up costs are estimated to be 13 million but no other estimates are given for the additional costs to be borne by the Scottish Government, Scotland's businesses, who will have to operate any new system, or individual Scottish tax payers. The IA states these are indicative with "accurate estimates of costs [only being available once] implementation policies are determined" at the point of the necessary secondary legislation being brought forward. As the Institute of Chartered Accountants of Scotland highlights in its written submission to the Scotland Bill Committee, "Costs incurred by the UK Government and the Scottish Government, including Scottish public sector bodies, will require funding so this information will be needed as part of spending review and budgeting processes". There is there now a need to address the various questions on the costs and benefits of any new legislation, in particular the new tax raising and borrowing powers that are being proposed. For example:

What are the additional benefits deemed to be delivered by this new legislation, on an annual as well as on an NPV basis? Where and when will they accrue and who will be the main beneficiaries? Does this then set a ceiling on what Scotland's tax payers could legitimately afford to spend in securing such benefits? Might such an assessment of the possible benefits set a limit on the size and extent of any tax and borrowing powers? Are the projected additional benefits sufficiently large to compensate for the additional risks that the Scottish Government and the Scottish tax payer will be carrying following the introduction of greater FA?

Without detailed answers to such questions the Scottish Government and the Scottish tax payer face an open-ended cost that ex post could question the value of what is being put in place.

Conclusions The main conclusions with regards to the four issues highlighted at the beginning of this briefing note are: - The traditional drivers of economic growth tend to concentrate on microeconomic factors (such as innovation, R&D, entrepreneurship, and knowledge-based assets in general) as the key determinants of productivity, and thus ultimately long-run prospects. To a large extent, the policy levers available in this area have been within the control of the devolved Scottish Government since 2000. And yet, there has been little debate on where and how Scotland should improve such microeconomic policies i.e., does Scotland have distinctive and effective policies to increase (firm-level) productivity. - The research findings on the issue of the relationship between fiscal autonomy (or decentralisation) and economic growth are neither consistent nor robust. Overall, the most important finding is that there is no simple and robust relationship between fiscal decentralisation and economic growth. Indeed, any such relationship is likely to be obscured by two important difficulties: first, that definitional and data problems are currently significant; and second, that any such impacts may well be dominated by other economic and policy factors and so the precise impact of fiscal decentralisation will be very difficult to discern. - There are a variety of possible transmission mechanisms that might link FA to growth. However, they cannot be established using theory alone, nor, as we have seen, through existing empirical results. This may not be a surprising finding given how the various transmission mechanisms might work based on: different forms of FA; local/national government size; and institutional structures. - Future work needs to concentrate on the importance of knowing which of a variety of transmission mechanisms is the most vital in making any such relationship work. - On the corporation tax question, the evidence is again inconclusive over its impact on economic growth. This should not come as a shock as many inward investors and potential entrepreneurs will want to take into account a variety of taxation related issues, including the overall tax burden and the stability of any tax regime, when making investment decisions. - Is there a need to address the various questions on the costs and benefits of any new legislation, in particular new tax raising and borrowing powers? Without detailed answers to such questions the Scottish Government and the Scottish tax payer face an open-ended cost that ex-post could question the value of what is being put in place. - In looking forward on how future work might improve our knowledge base and in turn our chances of improving our economic growth rate, the following issues will be of key importance:

how to ensure that government decisions over falling capital spend are targeted at those investments with the highest economic returns;

Too much of the current debate centres around the role and importance of FA and its impact on growth, and yet this report suggests that FA has not been established as an addition to the list of factors likely to impact on long-run productivity and the growth of the Scottish economy. Hence, we need a more balanced approach, and not to forget the other (established) drivers of growth that are known to make a difference.

what skills policies government should support the most given the possibility (if any growth fails to result in high job creation) of high numbers of youth and long term unemployed; how to improve exports by identifying, and possibly supporting, Scottish industries who have a competitive advantage; how to improve innovation and productivity in both the public and private sectors.

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References Akai, N., Hosoi, M. and Nishimura, Y. (2009) Fiscal Decentralisation and Economic Volatility Evidence from State-level Cross-section Data of the United States Japanese Economic Review, 60, 2, 223-235. Angelopoulos, K., Economides, G., and P. Kammas (2007) Tax-spending policies and economic growth: Theoretical predictions and evidence from the OECD, European Journal of Political Economy. Azmar, C. (2010) International corporate taxation and U.S. multinationals' behaviour: an integrated approach, Canadian Journal of Economics, 43 (1), pp. 232-253. Baumol. W.J. (1984) On productivity growth in the long run, Atlanta Economic Journal, 12, 4-10. BERR 2008. BERR's role in raising productivity: new evidence. BERR economics paper 1. http://www.bis.gov.uk/files/file44504.pdf. Feld, L., Doring, T. and H. Zimmerman (2004) Federalism, Decentralisation and Economic Growth, 2004. Available at: http://www.zei.de/download/Foederalismus/Feld%20et%20al%20Federalism%20Decentr%20Gro wth.pdf. Feld, L. and J. Schnellenbach (2010), Fiscal Federalism and Long Run Macroeconomic Performance: A Survey of Recent Research, March 2010. Krugman, P. R. 1994. The age of diminished expectations : U.S. economic policy in the 1990s. Rev. and updated ed. Cambridge, Mass. ; London: MIT Press. Lee, Y. and R.H. Gordon (2005) Tax structure and Economic Growth, Journal of Public Economics Hallwood, P. and R. MacDonald (2009) The Political Economy of Financing Scottish Government, 2010, Edward Elgar. Hughes Hallett, A. and D. Scott (2010) Scotland: A New Fiscal Settlement, March, Policy Forum. Institute of Chartered Accountants of Scotland, (2011) 'Submission from Institute of Chartered Accountants of Scotland', written submsssion to the Scotland Bill Committee. http://www.scottish.parliament.uk/s3/committees/scotBill/documents/47.SBInstituteofChartered AccountantsofScotland.pdf Mourre, G. 2009. What explains the differences in income and labour utilisation and drives labour and economic growth in Europe? A GDP accounting perspective. Directorate General Economic and Monetary Affairs, European Commission. http://ideas.repec.org/p/euf/ecopap/0354.html. O'Mahony, M. & Timmer, M. P. 2009. Output, Input and Productivity Measures at the Industry Level: The EU KLEMS Database. Economic Journal, 119, F374-F403. OECD 2003. The sources of economic growth in OECD countries. Paris. http://www.oecd.org/dac/ictcd/docs/otherdocs/OtherOECD_eco_growth.pdf. PriceWaterhouseCoopers (2011) Corporation Tax Tax Changer, or Game Over?. Rodriguez-Pose, A. & Ezcurra, R. (2010) Is fiscal decentralisation harmful for economic growth? Evidence from the OECD countries, Journal of Economic Geography, Vol 10, Issue 5, September. Scottish Government (2007): The Government Economic Strategy. Available at: http://www.scotland.gov.uk/Publications/2007/11/12115041/0. Smart Successful Scotland (2004) Enterprise strategy and strategic direction to the Enterprise Networks available at http://www.scotland.gov.uk/Publications/2004/11/20246/46555. Thornton, J. (2007) Fiscal Decentralisation and Economic Growth Reconsidered, 2007, Journal of Urban Economics, 61. Widmalm, F. (2001) Tax Structure and Growth: Are Some Taxes Better Than Others?, Public Choice, 107. 11