Fiscal Decentralisation and Government Size: Evidence from a Panel of European Countries

• Suzana Makreshanska-Mladenovska ^[1] ; Goran Petrevsk ^[1]
  1. [1] Saints Cyril and Methodius University of Skopje

     Saints Cyril and Methodius University of Skopje

     Macedonia

     
• Localización: Hacienda Pública Española / Review of Public Economics, ISSN 0210-1173, Nº 229, 2019, págs. 33-58
• Idioma: inglés
• DOI: 10.7866/hpe-rpe.19.2.2
• Enlaces
  • Texto completo (pdf)
• Resumen

  • This paper provides empirical evidence on the association between fiscal decentralisation and government size on a sample of 28 European countries during 1990-2016. The main findings from our study are as follows: first, expenditure decentralisation is associated with smaller government size; second, revenue decentralisation has negative effect on government size only in the sub-sample of Central and Eastern European countries; third, we cannot provide empirical support to the common-pool hypothesis, implying that it is expenditure decentralisation that matters for the size of general government notwithstanding how sub-national governments finance their expenditure.

• Referencias bibliográficas
  • Alesina, A. and Wacziarg, R. (1998), “Openness, country size and government”, Journal of Public Economics, 69(3): 305-321.
  • Álvarez, J. and Arellano, M. (2003), “The Time Series and Cross-Section Asymptotics of Dynamic Panel Data Estimators”, Econometrica, 71(4):...
  • Arellano, M. (2003), Panel Data Econometrics, Oxford: Oxford University Press.
  • Arellano, M. and Bond, S. (1991), “Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations”,...
  • Arellano, M. and Bover, O. (1995), “Another Look at the Instrumental Variable Estimation of Error Components Models”, Journal of Econometrics,...
  • Ashworth, J., Galli, E. and Padovano, F. (2013), “Decentralization as a constraint to Leviathan: a panel cointegration analysis”, Public Choice,...
  • Baltagi, B. H. (2008), Econometric Analysis of Panel Data (fourth edition), Chichester, UK: John Wiley & Sons.
  • Baskaran, T. (2011), “Fiscal decentralization, ideology and the size of government”, European Journal of Political Economy, 27(3): 485-506.
  • Baskaran, T., Feld, L. P. and Schnellenbach, J. (2016), “Fiscal Federalism, Decentralization, and Economic Growth: A Meta‐Analysis”, Economic...
  • Blume, L. and Voigt, S. (2011), “Federalism and decentralization a critical survey of frequently used indicators”, Constitutional Political...
  • Blundell, R. and Bond, S. (1998), “Initial Conditions and Moment Restrictions in Dynamic Panel Data Models”, Journal of Econometrics, 87:...
  • Bond, S. (2002), “Dynamic Panel Data Models: A Guide to Micro Data Methods and Practice”, CEMMAP Working Paper, CWP 09/02.
  • Brennan, G. and Buchanan, J. M. (1980), The power to Tax: Analytical Foundations of a Fiscal Constitution, New York: Cambridge University...
  • Buchanan, J. M. and Wagner, R. E. (1977), Democracy in Deficit, New York: Academic Press.
  • Cassette, A. and Paty, S. (2010), “Fiscal decentralization and the size of government: a European country empirical analysis”, Public Choice,...
  • Ebel, R. and Yilmaz, S. (2002), “On the Measurement and Impact of Fiscal Decentralisation”, World Bank Policy Research Working Paper Series...
  • Ehdaie, J. (1994), “Fiscal decentralization and the size of government: an extension with evidence from cross-country data”, World Bank Policy...
  • Feld, L. P., Kirchgässner, G. and Schaltegger, C. A. (2010), “Decentralized taxation and the size of government: Evidence from Swiss state...
  • Fiva, J. (2006), “New Evidence on the Effects of Fiscal Decentralization on the Size and Composition of Government Spending”, FinanzArchiv/Public...
  • Forbes, K. F. and Zampelli, E. M. (1989), “Is Leviathan a mythical beast?”, American Economic Review, 79(3): 568-577.
  • Golem, S. (2010), “Fiscal decentralisation and the size of government: a review of the empirical literature”, Financial theory and practice,...
  • Greene, W. H. (2003), Econometric Analysis, 5th ed., Upper Saddle River: Prentice Hall.
  • Grossman, J. P. (1989), “Fiscal Decentralization and government size: an extension”, Public Choice, 62(1)” 63-69.
  • Grossman, J. P. and West, G. E. (1994), “Federalism and the growth of government: revisited”, Public Choice, 79(1-2): 19-32.
  • Heil, J. B. (1991), “The search for Leviathan revisited”, Public Finance Review, 19(3): 334-346.
  • Jaén-García, M. (2018), “Wagner’s Law: A Revision and a New Empirical Estimation”, Hacienda Pública Española/Review of Public Economics, 224...
  • Jin, J. and Zou, H. (2002), “How Does Fiscal Decentralisation Affect Aggregate, National and Subnational Government Size?”, Journal of Urban...
  • Joulfaian, D. and Marlow, M. L. (1991), “Centralization and government competition”, Applied Economics, 23(10): 1603-1612.
  • Kyriacou, A. and Roca-Sagales, O. (2009), “Fiscal decentralization and the quality of government: Evidence from panel data”, Hacienda Pública...
  • Kaufmann, D., Kraay, A. and Mastruzzi, M. (2010), “The Worldwide Governance Indicators: Methodology and Analytical Issues”, World Bank Policy...
  • Liberati, P. and Sacchi, A. (2013), ‘Tax decentralization and local government size”, Public Choice, 157(1-2): 183-205.
  • Marlow, M. L. (1988), “Fiscal Decentralization and Government Size”, Public Choice, 56(3): 259-269.
  • Martínez-Vázquez, J. and Yao, M. (2009), “Fiscal Decentralization and Public Sector Employment: A Cross-Country Analysis”, Public Finance...
  • Martínez-Vázquez J., Lago-Peñas, S. and Sacchi, A. (2017), “The impact of fiscal decentralization: A survey”, Journal of Economic Surveys,...
  • Meloche, J. P., Vaillancourt, F. and Yilmaz, S. (2004), “Decentralization or fiscal autonomy? What does really matter? Effects on growth and...
  • Nelson, M. A. (1986), “An Empirical Analysis of State and Local Tax Structure in the Context of the Leviathan Model of Government”, Public...
  • Oates, W. E. (1972), Fiscal Federalism, New York: Harcourt Brace Jovanovich, Inc.
  • Oates, W. E. (1985), “Searching for Leviathan: An empirical study”, American Economic Review, 75(4): 748-757.
  • Oates, W. E. (2005), “Toward a second-generation theory of fiscal federalism”, International tax and public finance, 12(4): 349-373.
  • Peacock, A. T. and Wiseman, J. (1961), The Growth of Public Expenditure in the United Kingdom, Princeton: Princeton University Press.
  • Persson, T. and Tabellini, G. (2002), “Do constitutions cause large governments? Quasi-experimental evidence”, European Economic Review, 46(4-5):...
  • Phillips, P. C. B. and Sul, D. (2007), “Bias in Dynamic Panel Estimation with Fixed Effects, Incidental Trends and Cross Section Dependence”,...
  • Prohl, S. and Schneider, F. (2009), “Does Decentralization Reduce Government Size? A Quantitative Study of the Decentralization Hypothesis”,...
  • Rodden, J. (2003), “Reviving Leviathan: Fiscal Federalism and the Growth of Government”, International Organization, 57(4): 698-729.
  • Roodman, D. (2009a), “How to do xtabond2: An Introduction to Difference and System GMM in STATA”, The Stata Journal, 9(1): 86-136.
  • Roodman, D. (2009b), “A Note on the Theme of Too Many Instruments”, Oxford Bulletin of Economics and Statistics, 71(1): 135-158.
  • Rodrick, D. (1998), “Why Do More Open Economies Have Bigger Governments?”, Journal of Political Economy, 106(5): 997-1032.
  • Sarafidis, V., Yamagata, T. and Robertson, D. (2006), “A Test of Cross Section Dependence for a Linear Dynamic Panel Model with Regressors”,...
  • Shadbegian, R. J. (1999), “Fiscal Federalism, Collusion, and Government Size: Evidence from the States”, Public Finance Review, 27(3): 262-281.
  • Shah, A. (2004), “Fiscal decentralization in developing and transition economies: progress, problems, and the promise”, World Bank Policy...
  • Stegarescu, D. (2005), “Public Sector Decentralisation: Measurement Concepts and Recent International Trends”, Fiscal Studies, 26(3): 301-333.
  • Stein, E. H. (1998), “Fiscal Decentralization and Government Size in Latin America”, Inter-American Development Bank Working Paper No. 368.
  • Wallis, J. J. and Oates, E. W. (1988), “Decentralization in the public sector: an empirical study of state and local government”, in H. S....
  • Windmeijer, F. (2005), “A Finite Sample Correction for the Variance of Linear Efficient Two-step GMM Estimators”, Journal of Econometrics,...