Fiscal Decentralization and Government Size in Latin America
AbstractThis paper explores the link between fiscal decentralization and government size in Latin America. While most related work attempts to test Brennan and Buchanan's "Liviathan" hypothesis, here the emphasis is placed on a different channel: the potential for decentralization to aggravate the common pool problem. In addition to the degree of expenditure decentralization, we consider the importance of vertical fiscal imbalance, as well as some institutional variables related to the nature of intergovernmental relations which can affect the ability of some jurisdictions to shift the cost of their local programs onto others: the degree to which intergovernmental transfers are discretional, and the degree to which subnational governments have borrowing autonomy. We find that decentralization tends to produce larger governments, but this effect is particularly important in cases where vertical imbalance is high, transfers are discretional and the degree of borrowing autonomy of subnational governments is large.
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Bibliographic InfoArticle provided by Universidad del CEMA in its journal Journal of Applied Economics.
Volume (Year): II (1999)
Issue (Month): (November)
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Decentralization; government expenditures; fiscal discipline;
Other versions of this item:
- Ernesto H. Stein, 1998. "Fiscal Decentralization and Government Size in Latin America," Research Department Publications 4112, Inter-American Development Bank, Research Department.
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
- H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
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