This paper extends the empirical literature about the effects of fiscal decentralization on the growth of government along three dimensions. It distinguishes between the effects of the level of decentralization from the way local governments finance their expenditures (common pool versus own resources); it uses a panel cointegration approach to separate the long run effects of decentralization from the short run dynamics; and it extends and revises the datasets generally used in these empirical analyses. The results show that the amount of revenue raised by sub-national governments leads to a long-term fall in the size of government but grants have the opposite effect. In addition, a greater decentralization of expenditure leads to greater overall spending. When the short-term is considered these influences work slowly, as the speed of adjustment towards the desired government size is relatively sluggish. In addition, in the short run, there is also a clear effect from the role of local revenue raising powers that stimulates the growth of government. These results appear robust to changes in the composition of the variables, countries and periods included the sample. © 2012 Springer Science+Business Media, LLC.

Decentralization as a constraint to Leviathan: A panel cointegration analysis / John, Ashworth; Galli, Emma; Fabio, Padovano. - In: PUBLIC CHOICE. - ISSN 0048-5829. - STAMPA. - 156:3-4(2013), pp. 491-516. [10.1007/s11127-012-9962-8]

Decentralization as a constraint to Leviathan: A panel cointegration analysis

GALLI, EMMA;
2013

Abstract

This paper extends the empirical literature about the effects of fiscal decentralization on the growth of government along three dimensions. It distinguishes between the effects of the level of decentralization from the way local governments finance their expenditures (common pool versus own resources); it uses a panel cointegration approach to separate the long run effects of decentralization from the short run dynamics; and it extends and revises the datasets generally used in these empirical analyses. The results show that the amount of revenue raised by sub-national governments leads to a long-term fall in the size of government but grants have the opposite effect. In addition, a greater decentralization of expenditure leads to greater overall spending. When the short-term is considered these influences work slowly, as the speed of adjustment towards the desired government size is relatively sluggish. In addition, in the short run, there is also a clear effect from the role of local revenue raising powers that stimulates the growth of government. These results appear robust to changes in the composition of the variables, countries and periods included the sample. © 2012 Springer Science+Business Media, LLC.
2013
fiscal decentralization common pool government size panel cointegration; fiscal decentralization; common pool; leviathan hypothesis; panel cointegration analysis
01 Pubblicazione su rivista::01a Articolo in rivista
Decentralization as a constraint to Leviathan: A panel cointegration analysis / John, Ashworth; Galli, Emma; Fabio, Padovano. - In: PUBLIC CHOICE. - ISSN 0048-5829. - STAMPA. - 156:3-4(2013), pp. 491-516. [10.1007/s11127-012-9962-8]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11573/462474
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