Would less fiscal decentralization reduce public sector size across sectors in Europe?

Antonio Estache, Michele Cincera and Alexander Wolf

No 9347, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper presents an empirical analysis of the recent impact of fiscal decentralization in Europe on total expenditure for specific government functions as well as on total government size. A panel dataset for the years 2000 to 2009 for European countries has been constructed from EUROSTAT data. The effects of decentralization interact with the degree of vertical imbalances and tend to be negative as predicted by the Leviathan view of government. Effects vary strongly across government functions and are strongest in relative terms for infrastructure and social spending. Moderate restraining effects are found for education, while health spending is not significantly affected.

Date: 2013-02
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Working Paper: Would Less Fiscal Decentralization Reduce Public Sector Size across Sectors in Europe ? (2012)
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