The impact of economic openness on the vertical structure of the public sector

Antonio Sciala' (antonio.sciala@unipd.it) and Paolo Liberati
Additional contact information
Antonio Sciala': Universita' di Padova
Authors registered in the RePEc Author Service: Antonio Sciala'

No 85, "Marco Fanno" Working Papers from Dipartimento di Scienze Economiche "Marco Fanno"

Abstract: The aim of this paper is to investigate the impact of economic openness on the vertical structure of the public sector within a country. To tackle this issue we set up a simple theoretical model of fiscal federalism, where both central and local public spending enter the objective functions of both a central government and an aggregate local public sector, accommodating a wide range of behaviours. The degree of economic openness is assumed to erode central tax revenues and through this channel to affect the size of central spending, the size of grants paid to local governments and the optimal amount of local public spending. Consequences on the degree of decentralization are investigated. The main findings are that for a large subset of parameters an increase in economic openness leads to: a) a lower level of central government expenditures; b) a lower level of general government expenditures; c) a higher level of local taxation; d) a higher degree of public sector decentralization.

Keywords: openness; decentralization; fiscal federalism; public sector; government size. (search for similar items in EconPapers)
JEL-codes: H11 H50 H77 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2008
New Economics Papers: this item is included in nep-pbe and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://economia.unipd.it/sites/economia.unipd.it/files/20080085.pdf (application/pdf)

Related works:
Working Paper: The Impact of Economic Openness on the Vertical Structure of the Public Sector (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pad:wpaper:0085

Access Statistics for this paper

More papers in "Marco Fanno" Working Papers from Dipartimento di Scienze Economiche "Marco Fanno" Contact information at EDIRC.
Bibliographic data for series maintained by Raffaele Dei Campielisi (informatica.economia@unipd.it).