New Evidence on Fiscal Decentralization and the Size of Government

33 Pages Posted: 13 Jan 2006

See all articles by Jon H. Fiva

Jon H. Fiva

Norwegian School of Management (BI) - Department of Economics

Date Written: December 2005

Abstract

This paper adds to the literature by utilizing improved data on tax revenue decentralization to re-examine the relationship between fiscal decentralization and the size of government. An econometric analysis using panel data from 18 OECD countries shows that fiscal decentralization matters for both the size and composition of government spending. Tax revenue decentralization is associated with a smaller public sector, while expenditure decentralization is associated with a larger public sector. The former effect seems to be driven by a reduction in social security transfers, while the latter effect seems to be driven by increased government consumption.

Keywords: fiscal federalism, sub-central fiscal autonomy, government expenditures, size of government

JEL Classification: H11, H53, H77

Suggested Citation

Fiva, Jon H., New Evidence on Fiscal Decentralization and the Size of Government (December 2005). CESifo Working Paper Series No. 1615, Available at SSRN: https://ssrn.com/abstract=875312

Jon H. Fiva (Contact Author)

Norwegian School of Management (BI) - Department of Economics ( email )

Oslo
Norway

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