Fiscal decentralization and government size: The role of democracy

Mo Qiao, Siying Ding and Yongzheng Liu

European Journal of Political Economy, 2019, vol. 59, issue C, 316-330

Abstract: This paper examines how the level of democracy in a country affects the relationship between fiscal decentralization and government size. We argue that political regimes, proxied by their democracy levels, are important for different decentralization theories to predict the impact of fiscal decentralization on government size. We test this argument using panel data from 76 developed and developing countries during 1972–2013. We find strong and robust evidence that fiscal decentralization is negatively associated with government size and that a higher level of democracy tends to mitigate the negative impact of fiscal decentralization. Therefore, our study contributes to the literature by offering a novel insight on mixed results regarding the relationship between fiscal decentralization and government size in the literature.

Keywords: Fiscal decentralization; Government size; Democracy (search for similar items in EconPapers)
JEL-codes: D72 H11 H77 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (10)

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Working Paper: Fiscal Decentralization and Government Size: The Role of Democracy (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:59:y:2019:i:c:p:316-330

DOI: 10.1016/j.ejpoleco.2019.04.002

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