Ensuring the social welfare of societies is closely related to the type and manner in which governments use fiscal policies. In this regard, the main purpose of this study is to investigate the effects of fiscaldecentralization (income and expenditure) on social welfare. For this purpose, based on 30 provinces of Iran data’s during the 2005-2017 period, first the variables affecting welfare have been identified and the social welfare index for the provinces has been calculated, then the effects of decentralization have been investigated using the generalized method of movements for Income and expenses on the welfare index. The results of the model estimations, indicate a direct relationship between income and expenditure decentralization with social welfare, but with further increase in decentralization, this relationship has become negative and this indicates the instability of the fiscal situation in improving social welfare and has led to further increase in decentralization, this relationship becomes negative. Therefore, increasing decentralization and delegating more development projects to the provinces does not increase welfare, but also, first the necessary infrastructure for delegating affairs to the provinces, the power of self-government of the provinces should be evaluated, then with independence in Finance, we should expect the realization and improvement of social welfare in the provinces.
Abstract Local governance in developing countries demonstrates many problems related to financial sources and good governance of their finances. Local Self-Government (LSG) units in the Republic of North Macedonia are very small which results in a lack of capabilities to raise enough funds to offer delegated services. The local government in the Republic of North Macedonia centralizes almost all public finance. Local budgets depend heavily on state transfers and donations from the central budget. The lack of funds remained a crucial problem even though there were some attempts for the decentralization process. Practically, governments in many of the local governments in North Macedonia could not secure their resources. In this way, they could come with specific charges, but all taxes are decided by the central government. The practice showed that local governments before borrowing needs to be approved by the Ministry of Finance. The Republic of North Macedonia as a potential candidate to join the European Union should make several changes regarding the legislation during the process of accession to benefit from being a small candidate country. The main aim of this paper is to investigate alternative financial sources such are Municipal Bonds, Partnership Sukuk securities, and PPP. Unfortunately, many financial alternatives have not been able to be implemented due to failures in reforms and good financial governance. But they remain an open opportunity for developing a local government in the future.
Public administration reform is one of the main elements of structural reforms in the public sector, in an effort to achieve long-term sustainability of public finance and establish a sound business environment and to increase the quality and efficiency of the public services to the citizens.Public Administration Reform is a very broad concept a very comprehensive and include process changes in areas such as organizational structures, decentralization, personnel management, public finance, results-based management, regulatory reforms, revision of the civil service statute ect. Decentralization is a very important element of the Public Administration Reform as a whole and have a high importance in the entire process. Because of this importance and the big complexity of the issue in this paper I will analyze only the decentralization and local government reform as part of Public Administration Reform. All other pillars that represent Public Administration Reform needs also a special and deep analyze as well. From the mid-1980s onwards, a wave of decentralization reforms swept across the developing world, aimed at transferring responsibilities, resources and authority from higher to lower levels of government. In April 1996, the United Nations General Assembly, at its resumed 50th session, adopted resolution 50/225 on Public Administration and Development. The resolution confirmed the vital importance of strengthening public administration. Decentralization of governance is an important part of the process. Decentralization and local governance are recognized as basic components of democratic governance as providing the enabling environment in which decision-making and service delivery can be brought closer to local people and a very important piller of Public Administration. Decentralized governance is commonly regarded as a process of transferring powers, functions, responsibilities, and resources from central to local government and other entities on local level. From the organizational point of view, it is a process of restructuring of authority, so that there is a system of co-responsibility between institutions of governance at the central, regional and local levels, thus increasing the overall quality and effectiveness of the system of governance, while increasing the authority and capacities of sub-national levels. Decentralized governance provides the legal, administrative and fiscal frameworks for the empowerment of people and their institutions at sub-national levels, from regional to local.The Millennium Declaration, upon which the Millennium Goals are based, recognizes democratic governance, of which public administration is a key component, as central to the achievement of these goals.Each country followed its own trajectory related to historic legacies, geographic features, political factors, and prevailing socio-economic conditions and culture. This paper presents the characteristics of Public Administration and Local Government Reforms in Albania and North Macedonia (all countries of Western Balkan) in Post-Communist Era. In Western Balkan, part of the former Soviet Union, decentralization has been part of the political and economic transformation process, after 1989/1990 from a socialist system to a market economy and had to cope with three fundamental transformations; from a centrally planned state economy to a private market economy; from authoritarian centralized rule to a pluralist democracy; and from party and state-dominated societal organization to a relatively autonomous civil society. Additionally this countries face two development challenges: first, emerged from a decade of conflict and crisis, which influenced the economic, social and political life and structures and second, delayed transition from their socialist systems presents specific significant needs regarding reforms in their economies and public administration. The methodology used is the descriptive one as well as, analyze and comparative, based on secondary empirical data. The conclusion of this paper is that during the last years it is evident a visible progress regarding local government decentralization reform in counties analyzed. This progress has also positively affected their membership status towards EU. But the progress made so far has been slow and is still far from real decentralization parameters. Burdened with ethnic and nationalist conflicts the decentralization reforms are characterized by fragmented structures with unclear division of levels and powers, and non-existent accountability mechanisms.
This study theoretically and empirically analyzes the relationship between decentralization and welfare. The model identifies conditions in which a decentralized government is utility-maximizing compared to a centralized one. The empirical analysis utilized data from Philippine provinces to study the relationship between several decentralization indicators and welfare, as measured by per capita income, human development index, and poverty. Results suggest that fiscal independence, or the ability of local governments to generate their own revenues to finance their own expenditures rather than relying on central government transfers, is positively associated with per capita income and HDI. Moreover, this relationship is stronger when governance is better and weaker among lower-income provinces. In contrast, a higher number of local government units per population is linked to adverse development outcomes, and this association is stronger among lower-income provinces and weaker among those with good governance.
The article deals with economic and statistical research on the latest trends in local budget’s revenues caused by the decentralization reform, as well as the identification of its key problems, such as: significant differentiation in the regions’ fiscal capacity, arising due to a number of factors (social, geographical, resource, legislative ones); the regions’ dependence on central authorities due to the lack of effective mechanisms for devolution, hampering the efficiency and reducing the expediency of delegating certain functions; the insufficient level of the regions’ fiscal capacity; and finally, finding the ways of solving the abovementioned problems. These problems can be solved by creating conditions for increasing the local budgets’ own revenues in the face of limited budget funds. The state regional policy, having been carried out for decades, has created the regions’ deep dependence on the center and their lack of incentives to develop on their own by designing mechanisms to use the potential of Ukraine’s regions effectively. The recent decentralization policy is aimed at eliminating these negative trends. The success of this policy can only be ensured by improving and reforming the local government financing system. Local budgets are the main tool by which local authorities implement the program of social and economic development of a region. But at present, the mechanism of local budget formation is inefficient. This statement can be confirmed by the fact that the amount of financial assets in the local budget is insufficient to conduct an independent program of social and economic development. The structure and composition of local budget revenues have been studied on the basis of statistical information, their impact on the social and economic development of Ukraine’s regions has been determined. The research allows to conclude that successful implementation of the decentralization policy requires an individual approach to the formation of each administrative and territorial unit, a thorough study of economic sufficiency and independence of this unit, as well as research on social and economic development of this unit, as a whole.
Abstract We examine the role of political alignment and the electoral business cycle on municipality revenues in Greece for the period 2003–2010. The misallocation of resources for political gain represents a waste of resources with significant negative effects on local growth and effective decentralization. The focus of our analysis is municipality mayors since they mediate the relationship between central government and voters and hence can influence the effectiveness of any potential pork-barrelling activity. A novel panel data set combining the results of two local and three national elections with annual municipality budgets is used to run a fixed-effects econometric model. This allows us to identify whether the political alignment between mayors and central government affects municipality financing. We examine this at different stages of local and national electoral cycles, investigating both direct intergovernmental transfers (grants) and the remaining sources of local revenues (own revenues, loans). We find that total revenues are significantly higher for aligned municipalities in the run-up to elections due to higher intergovernmental transfers. We also find evidence that the 2008 crisis has reduced such pork-barrelling activity. This significant resource misallocation increases vertical networking dependency and calls for policy changes promoting greater decentralization and encouraging innovation in local revenue raising.
The main focus of this paper is to analyze the effect of local public finance on spatial land use through economic models and empirical evidence from Israel. The theoretic models extends the Alonso-Mill-Muth model by incorporating local public finance. The first finding is that steady population growth provides a channel for land capitalization through the mechanism of long term land property right. This implies a possible conflict of interest if ownership of land leasing revenue and the ad valorem property tax are not consistent. The empirical section examines one of the implications derived from the models highlighting a possible inconsistency between central and local governments due to land ownership centralization. This causes local tax revenue inequality among Israeli municipalities. Statistical evidence shows that cities with a larger share business land use can generate more tax without assistance from the central government, and are therefore more fiscal independent. Fiscal status has a significant effect on the planning time of residential construction. Municipalities with higher local tax revenues have shorter planning time(higher probability of acceptance) conditional on the plan’s size and other features.
This paper theoretically underpins the idea of greater involvement of local governments in the overall development of India explained through the theory of Fiscal Federalism. The theory outlines the dynamics of decentralization of power and functions through a multi-layered governance system leading to a new structure and added functions, finance, and accountability to local government. The paper also provides an overview of the increasing role of urban local governments in India and investigates whether the Urban Local Bodies (ULBs) of Gujarat – a state in India, are efficient to perform the functions and responsibilities assigned to them by the 74th Constitutional Amendment Act (CAA). It scrutinizes the financial health of local governments in the urban regions of India. The results based on the application of MANOVA indicate that the 74th CAA empowered ULBs with a strong economic base that these ULBs are capable of mobilizing their own resources. This means that smaller municipalities must develop and convergence must be supported by a proportionate level of grants. This will ensure that with the development of social infrastructure, economic activities will increase, and, as a result, the conversion will occur.
Julio López Laborda, Fernando Rodrigo, Eduardo Sanz Arcega
A necessary condition for the efficiency gains that the theory of fiscal federalism attributes to decentralization to be effective is that citizens rightly assign the governmental responsibility for public action. However, surveys show that most Spaniards are unable to correctly identify the taxes received by the various levels of government. Exploiting the 2015 wave of the Spanish Institute for Fiscal Studies’ Fiscal Barometer, this paper empirically determines the profile of citizens who are best able to identify the allocation of taxes among levels of government in Spain. The estimates suggest that these citizens are those who are able to identify the government that provides the services financed by those taxes, who correctly identify other taxes received by the same government, who reside in a chartered (“foral”) region, and who enjoy a high level of education.
Each chapter of this thesis investigates one aspect of China’s taxation system. Chapter 1 investigates the introduction of accelerated depreciation (AD) for fixed assets investment in China as a natural experiment. In contrast to the large positive impact of similar tax incentives in the U.S. and U.K. found in recent studies, we document that AD was ineffective in stimulating Chinese firms' investment and that firms fail to claim AD on over 80% of eligible investments. We investigate information frictions as the primary driver of both facts. Chapter 2 documents new facts about the structure and drivers of China’s SI contributory base, with an emphasis on non-compliance. First, 54% of firms do not pay into the employer-based SI system leaving 35% of employees outside of SI coverage. Among participating firms, an estimated 85% of firms are not fully compliant. Second, compliance increases sharply with firm size. Third, China is unique in that SI administration and insurance pooling are done at sub-provincial levels. We investigate how this decentralization contributes to firm non-compliance. Chapter 3 applies the lessons from Chapter 2 to analyze China's primary fiscal response to the Covid-19 crisis: an exemption for firms from making SI contributions, resulting in an average tax cut of 21 percentage points on employment. Labor informality substantially reduces the reach of this fiscal response and skews the tax savings towards large firms. Offsetting this negative targeting is the much higher labor intensity of the firms most vulnerable and exposed to the economic shock, which creates a larger benefit from payroll tax cuts for these firms. Chapter 4 studies the transition from a turnover tax (TT) to a value-added tax (VAT). This reform, the largest Chinese tax reform in a quarter-century, mostly eliminated the taxation of firm inputs. We assess the effects on production, investment, and outsourcing. We find minimal effects on firm output but large increases in fixed asset investment. The latter is driven by an effective 17 percentage point reduction in the tax rate on fixed asset purchases. We also find mixed evidence on whether outsourcing increased due to the reform.
The formation of the three tiers of government represents a novel experiment in Nepal’s federal journey since the adoption of the new constitution in 2015. State power in the former unitary system, both rights and responsibilities, has been divided across federal, provincial and local tiers of government, with a mix of exclusive and concurrent powers for each. In matters within their jurisdiction, subnational governments can formulate laws on financial rights, set their own budgets, make decisions, devise plans and policies, implement those plans, levy taxes, and collect revenues. In the roughly three years since devolution went into effect, a few problems and uncertainties have cropped up, particularly in the exercise of power. Subnational governments complain that the center has not been very cooperative when it comes to the formulation of laws, allocation of resources, transfer of the institutional set-up, etc. However, there have been some achievements in the implementation of federalism. Institutional structures have formed at the subnational government levels, they have begun staffing, and their fiscal situations are gradually strengthening. Improvements have been made in almost all areas, including social, human development, economic, infrastructure and administrative sectors. A sense of positive competition has been created between different local and provincial governments. However, a continuing point of tension in Nepal’s federal devolution is shape of the fiscal architecture supporting the new rights and responsibilities of subnational governments. The constitution provides many functional responsibilities to provinces but only limited revenue rights. This structure conflicts with the “finance follows function” principle of effective decentralization, suggesting that initiatives are needed to review the fiscal space of the provincial level. The purpose of this paper is to analyze existing institutional structures and details of subnational government finance (“fiscal architecture”) in Nepal, primarily at the provincial level, and identify recommendations for improvement.
Marko M. Vujić, Olja Munitlak Ivanović, Darko Nadić
Decentralization of certain sectoral policies in recent decades is one of the preconditions for the efficient functioning of modern states. A blatant example of the necessity of decentralized implementation of a sectoral policy is environmental policy. Environmental policy is based on four basic principles, one of them is subsidiarity. Why the effects of decentralized implementation of environmental policy in Serbia are unsatisfactory, and what factors influenced the process, is the main research question posed in this paper. Through multi-level analyzes, it will be pointed out that the inefficiency of the implementation of the state environmental policy is caused by inadequate decentralization in the first place. This will be supported by concrete examples such as inaccurate and inadequate sources and methods of financing, insufficient inventiveness of local self-government units, exclusion of citizens from the process of creating and making decisions in the field of environmental protection, lack of jobs for efficient environmental policy implementation, and imprecise legal frameworks. In proportion to the scope of the issue, the ways of financing in this area will be a special topic of work.
The article discusses the topical issue of the present day: decentralization and its budget efficiency (on the example of the Pavlivska amalgamated hromada in the Volyn region). A significant feature of decentralization today is voluntary association with other territories in order to improve living conditions and development of the area. Decentralization facilitates the improvement of investment climate, forms an efficient environment for attracting investments and financing the activities of Ukrainian regions. That is why decentralization allows amalgamated hromadas to reveal their internal potentials. The result of local self-government depends on the appropriate use of financial resources, independent resolution of regional issues. The publication uses indicators of budget self-sufficiency, budget effectiveness, budget transparency to analyze the budget efficiency of the territorial community, based on an assessment of the level of implementation of the distribution and redistribution of the local budget of the amalgamated hromada. Budget self-sufficiency demonstrates how the territorial community can develop itself, budget effectiveness is responsible for the expenditure part and the result of these costs, and budget transparency — for insightfulness and openness of information for citizens. The introduction of decentralization aims to improve the system of management of territorial communities and the system of administrative and territorial structure of the country, with the improvement of the state of residence and development of citizens regardless of their place of residence. With the help of decentralization, the investment climate of the country is improving and an efficient environment is being formed to attract foreign and domestic investors. Financing of territories allows opening up new opportunities for the evolvement of amalgamated hromadas.
In the age of economic globalization, the need for independence in important economic decisions individually and collectively is evident. Decentralization and fiscal decentralization are trends for political and economic reform in recent decades around the world. Albania began the process of transition from a centralized economy to a free economy in the early 1990s. Numerous reforms followed this process in almost all sectors. This process is accompanied by transforming existing economic mechanisms and infrastructure to better function the free-markets model, but above all, with the need to develop and create new legal, institutional, economic, and social instruments and spaces to increase the allocation and efficiency of public and private resources. The latest reform in terms of decentralization is the Territorial Administrative reform of 2014. We try to answer the research question through this study: What has been the impact of decentralization reforms on the local government's public services' performance? The research methodology used is a descriptive analysis of data obtained from the Ministry of Finance and Economic and local municipalities on the reforms' impact. Data analysis shows that some improvements and progress has been made in advancing decentralization reform, but there are still many challenges ahead, such as the lack of a clear legal and regulatory framework. Adding to that concern is local governments' financial autonomy, which remains a challenge for the future.
Abstract Setting limits on government action is critical to economic development. Some forms of government organization, such as market‐preserving federalism, seem effective to protect property rights in the long term with good results for economic efficiency. Spain endowed its regions with “Statutes of Autonomy” in the 1980s thus moving from a centralized to a decentralized form of government. It renewed and expanded some of the statutes in the 2000s. This article investigates whether these two waves of regionalization, which had their own characteristics in each region, had led to positive effects on economic performance. Using a novel autonomous region/country‐matched balanced sample for the period 1950–2016, we apply the synthetic control method and compare the economic growth trajectories of Spanish regions with their synthetic control groups not affected by the regionalization process. We show that the first wave of “Statutes of Autonomy” had a positive but temporary economic growth impact. By contrast, the second wave of regionalization of the 2000s is associated with a negative growth impact.
The germ of the fund that structurally changed the financing of education
Primary was born from an idea by Luiz Villela. In the early 1990s,
The Ary Oswaldo Commission studied the tax reform using different approaches.
Together we formulate a proposal, called salary-education,
to redesign the state and municipal quotas of the social contribution, which
it was collected from the payroll and distributed among governments according to the origin of the collection
Highly skilled human capital is usually also highly mobile. Concerns regarding interregional migration revolve around suboptimal public financing of higher education rooted in free-riding behaviour if budget responsibilities are decentralized. This investigation sets out to answer whether cross-state mobility of students in general and individual taste variation in the preference for ‘home’ and ‘university’ states in particular justify concerns about the free-riding behaviour of state governments. We analyse graduates’ location choices when leaving university using a mixed logit model and subsequently relate the revealed taste variation to individual characteristics. The results suggest some attachment to ‘home’ states that justify concerns about potential free-riding. However, substantial taste variation exists and is partly associated with the quality of human capital. State governments free-riding on the investment of others therefore may face a quality trade-off.
Introduction. In the context of reforming the system of local self-government and territorial organization of power, the use of world best practices in the context of decentralization and implementation of best foreign practices in shaping the finances of territorial communities and their associations is of paramount importance. Accordingly, a number of important theoretical postulates of domestic financial science need to be reconsidered through the prism of improving existing and developing the latest conceptual approaches to the functioning of the finances of united territorial communities (OTG) using international advances in this area. local development.Purpose. Given the limited theoretical and practical work of domestic scholars on the finances of the united territorial communities, the purpose of the article is to use the best world practices to improve the efficiency of OTG finances.Methods. The methodological basis of the study are general scientific and economic- statistical methods: analysis, synthesis, statistical method - to study the international experience of OTG finance reform; inductions, deductions - to determine the directions of development of OTG finances in Ukraine; abstract-logical, economic-mathematical - for estimating revenues and expenditures of local budgets of OECD countries. Results. The world experience of reforming the finances of territorial communities is considered. In the context of application of the best international practices the directions of development of finance of OTG in Ukraine under modern conditions of carrying out financial decentralization are offered. Estimates of revenues and expenditures of local budgets of OECD countries were assessed, which allowed to determine priorities in revenue generation, expenditure optimization, distribution of powers and functions, as well as the use of new sources to increase the revenue base of local communities and their associations in Ukraine. Discussion. The prospects for further research is to develop a model for optimizing the financing of OTG development in order to ensure the implementation of its own powers and functions.
While the founders of cryptocurrencies may not conceptualize their efforts as such, the infrastructural choices they make in designing their systems mimic those routinely made by lawmakers in the design of fiscal policy. The totality of their decision-making in this regard constitutes essential elements of “taxation” written into the governance structure of the cryptocurrency system — its tax cryptographia . This article examines how cryptocurrency founders determine what common goods are necessary to make their systems viable and then design a way to fund them. The object of comparing certain cryptographic design elements to taxation is to examine how investors, speculators, enthusiasts, and skeptics should assess the decisions that founders make, and why it might matter if the participants in cryptocurrency systems recognize the fiscal infrastructure as a reproduction of state-like functions that serve to allocate the cost and benefits of participating in the collective activity despite the core motivation of cryptocurrency to bypass centralized and hierarchical political institutions.
Income inequality is one of the problems that must be addressed immediately because it can have an impact on economic inefficiency and weaken the stability of social solidarity. One of the policies that can reduce income inequality is fiscal decentralization implementation. Specifically, this study aimed to analyze the effect of fiscal decentralization on income inequality in regencies and cities in West Java. The model used in this research was a fixed effect panel data regression. Fiscal decentralization was measured by adding the total regional revenue (Pendapatan Asli Daerah/PAD) to revenue sharing (Dana Bagi Hasil /DBH) and divided by the total regency and city expenditure. Income inequality was measured by using the Gini Ratio. The results indicated that fiscal decentralization could reduce income inequality in regencies and cities in West Java. The reason was that, through decentralization, local government could manage their finance and affect the welfare level. In addition, local government could also implement certain policies to increase the potential of each region.
Today, the problem of cities local finances and their governance, is at the heart of major national debates and reforms, as well as major concerns in all countries where decentralization continues and aims to strengthen the autonomy and competences of local administrations. The mobilization of local fiscal potential is a fundamental condition for promoting sustainable urban development. Despite the efforts made, local Moroccan finance, like most developing countries, does not escape an absolute reality: The scarcity of the resource. The weakness of local resources in Morocco is more related to the real low level of local tax deduction than to the economic poverty of local authorities. Many sectors of the economy have very little or no tax, while property taxes does not contribute enough to local economic activity. This article uses the case of Morocco to analyze the challenges and failures of local finances in general, and of local taxation in particular. We also discuss the tools to promote the financing of cities to promote sustainable urban development in Morocco.
Local governments have been created as agents of local development in which the people in the local areas are given greater opportunities to influence policies and programs that directly affect their well-being and thereby reducing their poverty levels. But the implementation of the policies and programmes is bedeviled with many problems. Key among them is the issue of financing the local development projects in order to reduce rural poverty. The government of Ghana attempted to reduce this problem when it introduced a development fund in1994 known as the – District Assemblies Common Fund (DACF) to encourage local governance and deepen Government’s commitment to decentralization in general and fiscal devolution in particular. The study therefore, seeks to assess the impact of District Assembly Common Fund on Local Government Development in the Adaklu District Assembly in the Volta Region of Ghana. The study mainly adopted qualitative methods of research to obtain information on the experiences of the poor people in the Adaklu communities selected as study areas. Interview guides were used to obtain information from the people in the communities, staff of the Assembly and some heads of the decentralized departments. A major finding of the study is that the assembly did not involve the rural people in the poverty reduction programmes in the district.