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New Evidence on Fiscal Decentralization and the Size of Government

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  • Jon H. Fiva

Abstract

This paper adds to the literature by utilizing improved data on tax revenue decentralization to re-examine the relationship between fiscal decentralization and the size of government. An econometric analysis using panel data from 18 OECD countries shows that fiscal decentralization matters for both the size and composition of government spending. Tax revenue decentralization is associated with a smaller public sector, while expenditure decentralization is associated with a larger public sector. The former effect seems to be driven by a reduction in social security transfers, while the latter effect seems to be driven by increased government consumption.

Suggested Citation

  • Jon H. Fiva, 2005. "New Evidence on Fiscal Decentralization and the Size of Government," CESifo Working Paper Series 1615, CESifo.
    • Handle: RePEc:ces:ceswps:_1615
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Graeme Roy, 2006. "Grants Versus Tax Sharing: the Extent of Central Government Control," ERSA conference papers ersa06p74, European Regional Science Association.
    2. John Ashworth & Emma Galli & Fabio Padovano, 2013. "Decentralization as a constraint to Leviathan: a panel cointegration analysis," Public Choice, Springer, vol. 156(3), pages 491-516, September.
    3. Daniel Gama e Colombo & Jorge Martinez-Vazquez, 2018. "Fiscal Decentralization and Public R&D Policy: A Country Panel Analysis," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1820, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    4. Niklas Potrafke, 2006. "Political Effects on the Allocation of Public Expenditures: Empirical Evidence from OECD Countries," Discussion Papers of DIW Berlin 653, DIW Berlin, German Institute for Economic Research.
    5. Guccio, Calogero & Pignataro, Giacomo & Rizzo, Ilde, 2014. "Do local governments do it better? Analysis of time performance in the execution of public works," European Journal of Political Economy, Elsevier, vol. 34(C), pages 237-252.
    6. Heijdra, Ben J. & Ligthart, Jenny E., 2010. "The Transitional Dynamics Of Fiscal Policy In Small Open Economies," Macroeconomic Dynamics, Cambridge University Press, vol. 14(1), pages 1-28, February.
    7. Diego Pinilla & Juan de Dios Jiménez & Roberto Montero, 2013. "Dimensión del Estado y descentralización fiscal. Elementos para el debate desde la experiencia reciente de América Latina," Revista de Economía del Rosario, Universidad del Rosario, June.
    8. repec:dau:papers:123456789/179 is not listed on IDEAS
    9. Aurélie Cassette & Sonia Paty, 2010. "Fiscal decentralization and the size of government: a European country empirical analysis," Public Choice, Springer, vol. 143(1), pages 173-189, April.
    10. Pierre Salmon, 2013. "Horizontal competition in multilevel governmental settings," Working Papers hal-00830876, HAL.
    11. David Cantarero Prieto & Marta Pascual Saez, "undated". "Decentralisation and health care outcomes: An empirical analysis within the European Union," Studies on the Spanish Economy 220, FEDEA.
    12. Jiménez-Rubio, Dolores, 2011. "The impact of fiscal decentralization on infant mortality rates: Evidence from OECD countries," Social Science & Medicine, Elsevier, vol. 73(9), pages 1401-1407.

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    Keywords

    fiscal federalism; sub-central fiscal autonomy; government expenditures; size of government;
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