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Volume 64, Issue 1

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An Empirical Analysis of the Relationship between Fiscal Decentralization and the Size of Government

Golem, Silvia; Malešević Perović, Lena

Year: 2014   Volume: 64   Issue: 1   Pages: 30-58

Abstract: The goal of this paper is to investigate the relationship between fiscal decentralization and the size of government. Using a pooled mean group estimator, which has rarely been applied in this context, we analyze a set of 23 OECD countries over the period 1970–2008. In contrast to previous studies we use an improved measure of fiscal decentralization, which effectively quantifies the degree of sub-national autonomy. Our results suggest that, in the long run, fiscal decentralization decreases the size of government.

JEL classification: H11; H70; C33

Keywords: fiscal decentralization, government size, pooled mean group

RePEc: http://ideas.repec.org/a/fau/fauart/v64y2014i1p30–58.html

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