The expansion of the public sector in federalism: a comparative analysis of a macro level governing structure and government size

ABSTRACT

Utilising Oates’ fiscal federalism theorem, the Tiebout model and Berry’s common pool model, this paper examines the effects of four characteristics of a macro level governing structure on public sector employment using a mixed method approach. Regression analysis explores the individual effect of fiscal decentralisation, spatial fragmentation, interjurisdictional competition and jurisdictional overlap on the levels of local public employment; and the qualitative comparative analysis explores the complexities between the four macro characteristics and their combined relations to the levels of state public employment. The results of the statistical analysis suggest that more labour inputs are required to produce public goods and services to meet the needs of local residents. Moreover, the qualitative comparative analysis reveals causality asymmetry between these characteristics and highlights how different interactions of characteristics of a macro level governing structure affect different levels of public sector employment.