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

Suzana Makreshanska-Mladenovska () and Goran Petrevski ()
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Suzana Makreshanska-Mladenovska: Saints Cyril and Methodius University

Hacienda Pública Española / Review of Public Economics, 2019, vol. 229, issue 2, 33-58

Abstract: This paper provides empirical evidence on the association between fiscal decentralisation and govern-ment 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 hypoth-esis, implying that it is expenditure decentralisation that matters for the size of general government notwithstanding how sub-national governments finance their expenditure.

Keywords: Fiscal decentralisation; government size; Leviathan hypothesis; common-pool hypothesis; GMM. (search for similar items in EconPapers)
JEL-codes: C33 H50 H71 H77 (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:hpe:journl:y:2019:v:229:i:2:p:33-58