It is theoretical expected that decentralization be a route to efficient provision of the local public services that will also boost economic growth due to efficient utilisation of scarce resources. Nevertheless, the existing empirical studies present mixed results on this presumed positive relationship between decentralization and economic growth. It is important to note here that the second generation theories of fiscal federalism talks about the enabling environment for decentralisation to yield positive results; talking explicitly, an enabling institutional setup is required. Therefore, current study examines the complementarity between fiscal decentralization and institutions in stimulating growth by using Fixed Effect (FE) method with rich cross country panel data for the period from 1984 to 2012. The results suggest that fiscal decentralization and institutions both are instrumental in economic growth. Supervisor:- Dr. Iftikhar Ahmad