Annotation This paper examines the relationship between fiscal decentralizationthe assignment of revenue sources and expenditure functions across government levelsand government size in Moldova. the empirical resultsbased on data for a cross-section of Moldovan subnational governments in 1998suggest that fiscal decentralization is associated with larger subnational governments and that the countrys revenue-sharing system imposes a constraint on subnational spending. Moldova is currently undergoing unprecedented reform of its system of intergovernmental fiscal relations, and consolidation of its local government. This reform package is crucial to ensure that decentralization does not increase the size of government.
