Fiscal Decentralization and Public Sector Size in Australia*

Abstract

This paper examines the impact ofjiscaldecentralization and intergovernmental collusion, and the resultingjiscal dependence, on the size of the public sector in Australia Contrary to evidence for the United States. fscal decentralization is found to have no impact on public sector sue in Australia Three possible explanations for this finding were suggested the relatively small number of lowerlevel government$. the economic insignifiance of local governments; und the relative immobility of citizens Fiscal dependence of State governments on the Commonwealth proves a signifKant determinant of public sector size, consistent with fwdings for the United States.