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New Evidence on the Effect of Fiscal Decentralization on the Size and Composition of Government Spending

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Author Info
Jon H. Fiva

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Abstract

This paper adds to the literature by utilizing improved data on tax revenue decentralization to reexamine 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 the 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 results indicate that the former effect is driven by a reduction in social security transfers, while the latter effect is driven by increased government consumption.

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File URL: http://www.ingentaconnect.com/content/mohr/fa/2006/00000062/00000002/art00006
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Publisher Info
Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.

Volume (Year): 62 (2006)
Issue (Month): 2 (June)
Pages: 250-280
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Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200606)62:2_250:neoteo_2.0.tx_2-2

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Web page: http://www.mohr.de/fa

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Postal: Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany
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Related research
Keywords: fiscal federalism; subcentral fiscal autonomy; size of government; composition of government;

Other versions of this item:

Find related papers by JEL classification:
H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

Cited by:
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  1. Paul Hallwood & Ronald MacDonald, 2008. "A Review of the Empirical Evidence on the Effects of Fiscal Decentralization on Economic Efficiency: With Comments on Tax Devolution to Scotland," Working papers 2008-46, University of Connecticut, Department of Economics. [Downloadable!]
  2. Antonis Adam & Manthos D. Delis & Pantelis Kammas, 2008. "Fiscal Decentralization and Public Sector Efficiency: Evidence from OECD Countries," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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This page was last updated on 2009-12-1.

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