Does Decentralization Affect the Size of Public Intervention? Evidence from Anti-Covid Public Policies

Abstract Although the impact of decentralization on public sector size has been extensively studied, little attention has been given to how this relationship unfolds during extreme events. Does decentralization amplify or constrain government intervention in times of crisis? This article addresses this gap by examining how different dimensions of decentralization influenced the size of fiscal measures adopted by thirty-one European countries in response to the crunch of the Covid-19 pandemic. Using data from the Oxford Covid-19 Government Response Tracker, we find that subnational expenditure and several dimensions of regional power constrain public intervention during crises. On the contrary, and although subnational taxing powers appear to have no significant effect, greater subnational borrowing autonomy is associated with larger policy responses.