SearchforLeviathanEvidencefromtheUSA.docVIP

Search for “Leviathan”: Evidence from the USA Economics 5801-MA Research Paper Research Paper in Partial Fulfillment of the Degree of Master’s of Arts in Economics Approved: _____________________________________ _____________________________________ Hans Chen ID Number: 997004718 Dr. L. DiMatteo April 25, 2000 Search for “Leviathan”: Evidence from the USA Hansheng Chen Abstract: Various hypothesis concerning centralization and government size are developed from the theoretical and empirical literature in this area. An investigation of the relationship between the government size and centralization is then conducted using cross-section data from the United States. The result shows that the state and local government sector is larger in states with larger populations. Also, it seems that the size of government varies positively with the size of the per capita transfer from state to local government. In addition, no relationship between centralization and government size at the state and local level is found, which following previous work suggests Leviathan is a “mythical beast.” Introduction Literature and Review Geoffrey Brennan and James Buchanan (1980) argue that government is a revenue maximizing ‘Leviathan’, therefore, decentralization of government taxing and expenditure power would serve to constrain the size of the public sector. In a Tiebout-like world with mobile consumer-voters, any attempt on the part of the one jurisdiction to exploit its citizenry would result in instantaneous and complete migration on the part of the citizenry to an alternative, non-exploitive jurisdiction. This competition among jurisdictions for the patronage of the citizenry limits the extent of the fiscal exploitation possible and, as such, the size of the public sector. There has been a large empirical literature, which has sought to examine the val