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Fiscal Decentralization and Public Sector Employment

Author

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  • Jorge Martinez-Vazquez

    (Georgia State University)

  • Ming-Hung Yao

    (Tunghai University, mhyao@thu.edu.tw)

Abstract

This paper investigates the relationship between public sector employment and fiscal decentralization. We develop a theoretical framework modeling the interactions between the central and subnational executives regarding the level of public employment at the central and subnational government levels. In our empirical work, based on a large cross-country dataset, we find that, ceteris paribus, the level of total public sector employees in a country increases with its level of fiscal decentralization. Even though central government employment decreases with decentralization, this is more than fully offset by the increase in employment at the subnational level accompanying decentralization. Our empirical results also indicate that the relationship between GDP per capita and public sector employment is not monotonic but quadratic, that total public sector employment is higher in unitary countries vis-à -vis federal countries, and that public employment increases with the country’s international economic openness.

Suggested Citation

  • Jorge Martinez-Vazquez & Ming-Hung Yao, 2009. "Fiscal Decentralization and Public Sector Employment," Public Finance Review, , vol. 37(5), pages 539-571, September.
  • Handle: RePEc:sae:pubfin:v:37:y:2009:i:5:p:539-571
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Makreshanska, Suzana & Petrevski, Goran, 2016. "Fiscal decentralization and government size across Europe," MPRA Paper 82472, University Library of Munich, Germany.
    2. Jorge Martinez-Vazquez & Santiago Lago-Peñas & Agnese Sacchi, 2017. "The Impact Of Fiscal Decentralization: A Survey," Journal of Economic Surveys, Wiley Blackwell, pages 1095-1129.
    3. 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.
    4. Bartolini, David & Ninka, Eniel & Santolini, Raffaella, 2017. "Tax Decentralisation, Labour productivity and Employment," MPRA Paper 81070, University Library of Munich, Germany.
    5. Juan Luis Gómez-Reino & Jorge Martinez-Vazquez, 2013. "An international perspective on the determinants of local government fragmentation," Chapters,in: The Challenge of Local Government Size, chapter 2, pages 8-54 Edward Elgar Publishing.
    6. repec:hpe:journl:y:2016:v:219:i:4:p:137-160 is not listed on IDEAS
    7. Makreshanska, Suzana & Petrevski, Goran, 2015. "Fiscal Decentralization and Inflation in Central and Eastern Europe," MPRA Paper 77596, University Library of Munich, Germany, revised 16 Mar 2017.

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