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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

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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Bibliographic 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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Related research

Keywords: fiscal federalism; subcentral fiscal autonomy; size of government; composition of government;

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Cited by:
  1. Paolo Liberati & Agnese Sacchi, 2010. "Tax Decentralisation and local Government size," Departmental Working Papers of Economics - University 'Roma Tre' 0123, Department of Economics - University Roma Tre.
  2. Arze del Granado, F. Javier & Martinez-Vazquez, Jorge & McNab, Robert M., 2012. "Decentralized Governance and Preferences for Public Goods," MPRA Paper 42459, University Library of Munich, Germany.
  3. Jia, Junxue & Guo, Qingwang & Zhang, Jing, 2014. "Fiscal decentralization and local expenditure policy in China," China Economic Review, Elsevier, vol. 28(C), pages 107-122.
  4. Antonis Adam & Manthos Delis & Pantelis Kammas, 2014. "Fiscal decentralization and public sector efficiency: evidence from OECD countries," Economics of Governance, Springer, vol. 15(1), pages 17-49, February.
  5. Johann Bröthaler & Michael Getzner, 2011. "Fiscal Autonomy and Total Government Expenditure: An Austrian Case-study," International Advances in Economic Research, Springer, vol. 17(2), pages 134-156, May.
  6. Furceri, Davide & Sacchi, Agnese & Salotti, Simone, 2014. "Can fiscal decentralization alleviate government consumption volatility?," MPRA Paper 54513, University Library of Munich, Germany.
  7. Maura Francese & Massimiliano Piacenza & Marzia Romanelli & Gilberto Turati, 2012. "Understanding Inappropriateness in Health Care. The Role of Supply Structure, Pricing Policies and Political Institutions in Caesarean Deliveries," Working papers 001, Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.
  8. 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.
  9. Michael, Bryane & Popov, Maja, 2011. "The Size and Structure of Government," MPRA Paper 53283, University Library of Munich, Germany.
  10. Alonso, Jose M. & Clifton, Judith & Díaz-Fuentes, Daniel, 2011. "Did New Public Management Matter? An Empirical Analysis of The Outsourcing and Decentralization Effects on Public Sector Size," MPRA Paper 43255, University Library of Munich, Germany.
  11. Agnese Sacchi & Simone Salotti, 2012. "A comprehensive anlysis of expenditure decentralization and of the composition of local public spending," Departmental Working Papers of Economics - University 'Roma Tre' 0155, Department of Economics - University Roma Tre.

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