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Fiscal decentralization, ideology, and the size of the public sector

No consensus has yet emerged on whether fiscal decentralization facilitates or impedes the growth of the public sector. One explanation for this ambiguity in the literature is that the effect of fiscal decentralization on public sector size depends on the government’s ideology. This paper therefore develops a simple model to study theoretically how interactions between fiscal decentralization and the ideology of the government may influence the size of the public sector. Thereafter, the implications of the model are tested empirically with panel data from 18 OECD countries over the 1980-2000 period.

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File URL: http://mpra.ub.uni-muenchen.de/30188/1/MPRA_paper_30188.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 30188.

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Date of creation: 2009
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Handle: RePEc:pra:mprapa:30188
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  1. Hindriks, Jean & Lockwood, Ben, 2009. "Decentralization and electoral accountability: Incentives, separation and voter welfare," European Journal of Political Economy, Elsevier, vol. 25(3), pages 385-397, September.
  2. Jing Jin & Heng-fu Zou, 2000. "How does fiscal decentralization affect aggregate, national, and subnational government size?," CEMA Working Papers 72, China Economics and Management Academy, Central University of Finance and Economics.
  3. Neyapti, Bilin, 2010. "Fiscal decentralization and deficits: International evidence," European Journal of Political Economy, Elsevier, vol. 26(2), pages 155-166, June.
  4. Ernesto H. Stein, 1998. "Fiscal Decentralization and Government Size in Latin America," Research Department Publications 4112, Inter-American Development Bank, Research Department.
  5. repec:ner:tilbur:urn:nbn:nl:ui:12-3125517 is not listed on IDEAS
  6. Schaltegger, Christoph A. & Feld, Lars P., 2009. "Are fiscal adjustments less successful in decentralized governments?," European Journal of Political Economy, Elsevier, vol. 25(1), pages 115-123, March.
  7. Timothy Goodspeed, 2002. "Bailouts in a Federation," International Tax and Public Finance, Springer, vol. 9(4), pages 409-421, August.
  8. Zodrow, George R. & Mieszkowski, Peter, 1986. "Pigou, Tiebout, property taxation, and the underprovision of local public goods," Journal of Urban Economics, Elsevier, vol. 19(3), pages 356-370, May.
  9. de Mello, Luiz Jr, 2000. "Fiscal Decentralization and Intergovernmental Fiscal Relations: A Cross-Country Analysis," World Development, Elsevier, vol. 28(2), pages 365-380, February.
  10. Marlow, Michael L, 1991. " Privatization and Government Size," Public Choice, Springer, vol. 68(1-3), pages 273-76, January.
  11. Sorribas-Navarro, Pilar, 2011. "Bailouts in a fiscal federal system: Evidence from Spain," European Journal of Political Economy, Elsevier, vol. 27(1), pages 154-170, March.
  12. P.J. Grossman, 1988. "Fiscal Decentralization and Government Size: An extension," Economics Discussion / Working Papers 88-16, The University of Western Australia, Department of Economics.
  13. Grossman, Philip J & West, Edwin G, 1994. " Federalism and the Growth of Government Revisited," Public Choice, Springer, vol. 79(1-2), pages 19-32, April.
  14. Dan Stegarescu, 2005. "Public sector decentralisation: measurement concepts and recent international trends," Fiscal Studies, Institute for Fiscal Studies, vol. 26(3), pages 301-333, September.
  15. Lars P Feld & Friedrich Schneider, 2000. "State and local taxation," Economics working papers 2000-05, Department of Economics, Johannes Kepler University Linz, Austria.
  16. Rodden, Jonathan, 2003. "Reviving Leviathan: Fiscal Federalism and the Growth of Government," International Organization, Cambridge University Press, vol. 57(04), pages 695-729, September.
  17. Michael J. Keen & Christos Kotsogiannis, 2002. "Does Federalism Lead to Excessively High Taxes?," American Economic Review, American Economic Association, vol. 92(1), pages 363-370, March.
  18. Oates, Wallace E, 1985. "Searching for Leviathan: An Empirical Study," American Economic Review, American Economic Association, vol. 75(4), pages 748-57, September.
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