Fiscal decentralisation and the size of government: a review of the empirical literature
Within the public choice framework, it has been argued that decentralised authority over the provision and financing of certain public goods and services induces competitive pressure among different governmental units and consequently reduces the size of government. However, in many countries, fisca...
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| Format: | Article |
| Language: | English |
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Institute of Public Finance
2010-03-01
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| Series: | Financial Theory and Practice |
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| Online Access: | http://www.ijf.hr/eng/FTP/2010/1/golem.pdf |
| Summary: | Within the public choice framework, it has been argued that decentralised authority over the provision and financing of certain public goods and services induces competitive pressure among different governmental units and consequently reduces the size of government. However, in many countries, fiscal decentralisation seems to have occurred almost exclusively through devolution of expenditure activities, without the accompanying devolution of the tax authority. We address this issue in detail, and discuss the epercussions of the resulting vertical fiscal imbalance on the total size of government. We also discuss alternative, demand-side channels of the influence of fiscal decentralisation on the size of government. In the empirical literature that we review, little consensus on the relationship between fiscal decentralisation and the size of government is reached. |
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| ISSN: | 1846-887X 1845-9757 |