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How does fiscal decentralization affect aggregate, national, and subnational government size?

  • Jin, Jing
  • Zou, Heng-fu

Beyond conducting the usual regression analysis of the relationship between fiscal decentralization and aggregate government size (national and subnational combined), this paper makes the first attempt to examine how different fiscal decentralization measures affect the sizes of national and subnational (state and local combined) governments. An econometric analysis using panel data from 32 industrial and developing countries, 1980¨C1994, finds that (1) expenditure decentralization leads to smaller national governments, larger subnational governments, and larger aggregate governments; (2) revenue decentralization increases subnational governments by less than it reduces national governments, hence leads to smaller aggregate governments; and (3) vertical imbalance tends to increase the sizes of subnational, national, and aggregate governments.

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Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 52 (2002)
Issue (Month): 2 (September)
Pages: 270-293

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Handle: RePEc:eee:juecon:v:52:y:2002:i:2:p:270-293
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622905

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  1. Jan K. Brueckner, 2000. "Fiscal Decentralization in Developing Countries: The Effects of Local Corruption and Tax Evasion," Annals of Economics and Finance, Society for AEF, vol. 1(1), pages 1-18, May.
  2. Philip Grossman, 1989. "Fiscal decentralization and government size: An extension," Public Choice, Springer, vol. 62(1), pages 63-69, July.
  3. Marlow, Michael L, 1991. " Privatization and Government Size," Public Choice, Springer, vol. 68(1-3), pages 273-76, January.
  4. Zhang, Tao & Zou, Heng-fu, 1998. "Fiscal decentralization, public spending, and economic growth in China," Journal of Public Economics, Elsevier, vol. 67(2), pages 221-240, February.
  5. 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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