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Fiscal Decentralization and Government Size: An Extension

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This paper analyzes one method governments employ to circumvent the discipline of a competitive system of fiscal federalism - intergovernmental collusion in the form of intergovernmental grants. Grants, it is argued, serve to encourage the expansion of the public sector by concentrating taxing powers in the hands of the central government and by weakening the fiscal discipline imposed on governments forced to self-finance their expenditures. The results reported suggest that intergovernmental grants do encourage growth in the public sector. The results offer further support for the use of monopoly government assumptions in public sector modeling.

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  • Philip J. Grossman, 1989. "Fiscal Decentralization and Government Size: An Extension," Monash Economics Working Papers archive-05, Monash University, Department of Economics.
    • Handle: RePEc:mos:moswps:archive-05
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    1. Hammes, David L & Wills, Douglas T, 1987. "Fiscal Illusion and the Grantor Government in Canada," Economic Inquiry, Western Economic Association International, vol. 25(4), pages 707-713, October.
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    3. Michael Nelson, 1986. "An empirical analysis of state and local tax structure in the context of the Leviathan model of government," Public Choice, Springer, vol. 49(3), pages 283-294, January.
    4. Michael Marlow, 1988. "Fiscal decentralization and government size," Public Choice, Springer, vol. 56(3), pages 259-269, March.
    5. Philip J. Grossman, 1987. "Federalism and the Size of Government," School of Economics and Public Policy Working Papers 1987-07, University of Adelaide, School of Economics and Public Policy.
    6. Brennan,Geoffrey & Buchanan,James M., 2006. "The Power to Tax," Cambridge Books, Cambridge University Press, number 9780521027922.
    7. Logan, Robert R, 1986. "Fiscal Illusion and the Grantor Government," Journal of Political Economy, University of Chicago Press, vol. 94(6), pages 1304-1318, December.
    8. Nelson, Michael A, 1987. "Searching for Leviathan: Comment and Extension," American Economic Review, American Economic Association, vol. 77(1), pages 198-204, March.
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