Fiscal Decentralization and Public Sector Employment: A Cross-Country Analysis

Jorge Martinez-Vazquez () and Ming-Hung Yao ()
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Ming-Hung Yao: Department of Economics, Tunghai University, Taichung, Taiwan National University of Ireland Galway

International Center for Public Policy Working Paper Series, at AYSPS, GSU from International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University

Abstract: This paper investigates the relationship between public sector employment and fiscal decentralization. We develop a theoretical framework modeling the interactions between the central and sub-national executives regarding the level of public employment at the central and sub-national government levels. In our empirical work, based on a large cross-country dataset, we find that, ceteris paribus, the level of total public sector employees in a country increases with its level of fiscal decentralization. Even though central government employment decreases with decentralization, this is more than fully offset by the increase in employment at the sub-national level accompanying decentralization. Our empirical results also indicate that the relationship between GDP per capita and public sector employment is not monotonic but quadratic, that total public sector employment is higher in unitary countries vis-à-vis federal countries, and that public employment increases with the country’s international economic openness.

Keywords: fiscal decentralization; public sector employment; public sector size (search for similar items in EconPapers)
Pages: 49 pages
Date: 2009-03-01
New Economics Papers: this item is included in nep-pbe
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Citations: View citations in EconPapers (36)

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Persistent link: https://EconPapers.repec.org/RePEc:ays:ispwps:paper0903

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