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Fiscal decentralisation and the size of government: a review of the empirical literature

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  • Silvia Golem

    (Faculty of Economics, Split)

Abstract

Within the public choice framework, it has been argued that decentralised authority over the provision and financing of certain public goods and services induces competitive pressure among different governmental units and consequently reduces the size of government. However, in many countries, fiscal decentralisation seems to have occurred almost exclusively through devolution of expenditure activities, without the accompanying devolution of the tax authority. We address this issue in detail, and discuss the repercussions of the resulting vertical fiscal imbalance on the total size of government. We also discuss alternative, demand-side channels of the influence of fiscal decentralisation on the size of government. In the empirical literature that we review, little consensus on the relationship between fiscal decentralisation and the size of government is reached.

Suggested Citation

  • Silvia Golem, 2010. "Fiscal decentralisation and the size of government: a review of the empirical literature," Financial Theory and Practice, Institute of Public Finance, vol. 34(1), pages 53-69.
  • Handle: RePEc:ipf:finteo:v:34:y:2010:i:1:p:53-69
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    File URL: http://www.ijf.hr/eng/FTP/2010/1/golem.pdf
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    References listed on IDEAS

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    1. John Anderson & Hendrik van den Berg, 1998. "Fiscal Decentralization and Government Size: An International Test for Leviathan Accounting for Unmeasured Economic Activity," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 5(2), pages 171-186, May.
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    Cited by:

    1. Agnese Sacchi & Simone Salotti, 2017. "The influence of decentralized taxes and intergovernmental grants on local spending volatility," Regional Studies, Taylor & Francis Journals, vol. 51(4), pages 507-522, April.
    2. repec:bla:jecsur:v:31:y:2017:i:4:p:1095-1129 is not listed on IDEAS
    3. Jorge Martinez-Vazquez & Santiago Lago-Peñas & Agnese Sacchi, 2017. "The Impact Of Fiscal Decentralization: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 31(4), pages 1095-1129, September.
    4. Francis Amagoh & Aloysius Ajab Amin, 2012. "An Examination of the Impacts of Fiscal Decentralization on Economic Growth," International Journal of Business Administration, International Journal of Business Administration, Sciedu Press, vol. 3(6), pages 72-81, November.
    5. Silvia GOLEM & Lena MALEŠEVIC PEROVIC, 2014. "An Empirical Analysis of the Relationship between Fiscal Decentralization and the Size of Government," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 64(1), pages 30-58, February.
    6. repec:hpe:journl:y:2016:v:219:i:4:p:137-160 is not listed on IDEAS
    7. Patonov Nikolay Andonov, 2013. "Searching for A Restraint on the European Leviathan," Scientific Annals of Economics and Business, De Gruyter Open, vol. 60(2), pages 1-16, December.

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