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Fiscal Decentralization and Government Size: An Extension

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Abstract

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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Bibliographic Info

Paper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number archive-05.

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Length: 4 pages
Date of creation: 1989
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Publication status: Published in Public Choice, Vol. 62, No. 1 (Jul., 1989), pp. 63-66
Handle: RePEc:mos:moswps:archive-05

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Postal: Department of Economics, Monash University, Victoria 3800, Australia
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Web page: http://www.buseco.monash.edu.au/eco/
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