This dissertation seeks to investigate the relationship between public sector
employment and fiscal decentralization. We develop a theoretical model that helps us
understand the interaction of the central executive’s and subnational governor’s decisions
on the level of public employees at the central and subnational levels. Our empirical work
shows that fiscal decentralization policy shifts central government employees to the
subnational government level and that the increase in public employees at the subnational
government level overwhelms the decrease in public employees at the central level