The non-planned decentralization process starting from the eighties in Brazil, which resulted in financial and political strengthened of states and municipal districts, receives a lot of criticism. The goal of the present study is to analyze the possible effects of this tendency on government's size in the country. Econometric panel data analysis for 26 brazilian states suggests that fiscal decentralization is negatively related with government's size, confirming the hypotheses of models that see in the government's decentralization a way of avoiding the exacerbated growth of the State. However, the impact of discipline of decentralization can be annulled if a strong dependence exists on the intergovernmental transfers.
government's size; fiscal decentralization; panel data
