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Fiscal Decentralization and Government Size: An International Test for Leviathan Accounting for Unmeasured Economic Activity

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  • John Anderson
  • Hendrik van den Berg

Abstract

Tests for the presence of Leviathan, evidenced by a positive relationship between the size of government measured as a percentage of GDP, and the degree of fiscal centralization, have provided mixed results. We derive alternative measures of the size of government taking into account household and informal market activity. Traditional Leviathan models are then re-estimated for an international sample of forty-five countries. Controlling for income, population, intergovernmental grants, and urbanization we test whether fiscal centralization is responsible for the relative size of government. We find no evidence of a relationship between fiscal centralization and government size. Copyright Kluwer Academic Publishers 1998

Suggested Citation

  • 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.
  • Handle: RePEc:kap:itaxpf:v:5:y:1998:i:2:p:171-186
    DOI: 10.1023/A:1008690304663
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Timothy Besley & Anne Case, 2003. "Political Institutions and Policy Choices: Evidence from the United States," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 7-73, March.
    2. Günther G. Schulze & Heinrich W. Ursprung, 1999. "Globalisation of the Economy and the Nation State," The World Economy, Wiley Blackwell, vol. 22(3), pages 295-352, May.
    3. Wilson, John Douglas & Wildasin, David E., 2004. "Capital tax competition: bane or boon," Journal of Public Economics, Elsevier, vol. 88(6), pages 1065-1091, June.
    4. Jorge Martínez Vázquez & Robert M. McNab, 2006. "Fiscal decentralization, macrostability and growth," Hacienda Pública Española, IEF, vol. 179(4), pages 25-49, September.
    5. Jon H. Fiva, 2005. "New Evidence on Fiscal Decentralization and the Size of Government," CESifo Working Paper Series 1615, CESifo Group Munich.
    6. Wilson, John Douglas, 2005. "Welfare-improving competition for mobile capital," Journal of Urban Economics, Elsevier, vol. 57(1), pages 1-18, January.
    7. George R. Crowley & Russell S. Sobel, 2010. "Does Fiscal Decentralization Constrain Leviathan? Evidence from Local Property Tax Competition," Working Papers 10-16, Department of Economics, West Virginia University.
    8. Fox, William F. & Gurley, Tami, 2006. "Will consolidation improve sub-national governments ?," Policy Research Working Paper Series 3913, The World Bank.
    9. Reingewertz, Yaniv, 2014. "Fiscal Decentralization - a Survey of the Empirical Literature," MPRA Paper 59889, University Library of Munich, Germany.
    10. George Crowley & Russell Sobel, 2011. "Does fiscal decentralization constrain Leviathan? New evidence from local property tax competition," Public Choice, Springer, vol. 149(1), pages 5-30, October.
    11. 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.
    12. John Douglas Wilson & Roger H. Gordon, 2003. "Expenditure Competition," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 399-417, April.
    13. Jon H. Fiva, 2006. "New Evidence on the Effect of Fiscal Decentralization on the Size and Composition of Government Spending," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 62(2), pages 250-280, June.
    14. Michael Keen & Christos Kotsogiannis, 2003. "Leviathan and Capital Tax Competition in Federations," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 177-199, April.
    15. Busemeyer, Marius R., 2007. "The Impact of Fiscal Decentralisation on Education and Other Types of Spending," MPIfG Discussion Paper 07/8, Max Planck Institute for the Study of Societies.
    16. Zhu, Z. & Krug, B., 2005. "Is China a Leviathan?," ERIM Report Series Research in Management ERS-2004-103-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    17. Madiès, Thierry, 2001. "Fiscalité superposée et externalités fiscales verticales : faut-il reconsidérer le débat entre concurrence et coopération fiscales?," L'Actualité Economique, Société Canadienne de Science Economique, vol. 77(4), pages 593-612, décembre.

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