Intergovernmental Finances in a Decentralized World

Abstract

Provides the basic foundation for understanding intergovernmental finances by (1) discussing why getting municipal finance right remains key to achieving a nation’s broader goals of economic growth, macroeconomic stabilization, and, for some countries, national cohesion among diverse populations; (2) summarizing the key considerations of alternative governance structures, as well as fundamental questions related to what role municipalities should play in a country’s revenue and expenditure systems; and (3) examining the role of government-to-government grants policy and the tools for ensuring accountability between the various levels of government and between the municipality and its citizens. A strong correlation exists between decentralization and growth in gross domestic product (GDP), though findings relating to macroeconomic stability and the relationship between fiscal decentralization and public sector size remain mixed. Case studies from Nepal, Poland, Egypt, Bosnia and Herzegovina, Sudan, South Africa, and Saudi Arabia show the wide variety of decentralization models utilized world-wide.