| The purpose of this article is to review the current knowledge in the fiscal federalism literature on the relationship between fiscal decentralization and the size of government which based on three strands of literature. First, the Leviathan hypothesis by Brennan and Buchanan-argued that fiscal decentralization serves as a constraint on the behaviour of revenue- maximizing governments and thereby, reduce the overall size of government. Second, the Wallis-Oates hypothesis which states that convinced fiscal decentralization increases the size of government since the delegation of expenditures is expected to increase the sub-national spending. The last, Brennan and Buchanan Collusion hypothesis, they proposed that fiscal decentralization encourages collusive behaviour among levels of government and thereby, it can increase the size of government. Through collusion, subnational government are able to increase their revenues and spending, beyond the level that would otherwise be attained in a competitive environment. Numerous researchers have tested the decentralization hypotheses, and ended with mixed result. The results of these empirical studies are mixed due in part to the different ways in which researchers selected the indicators of government size and the measures of fiscal decentralization. Considering this point, one can be concluded that tlie relationship between fiscal decentralization and the size of government is remains open questions. |