This paper presents an analysis of the decentralization process that has been taking place in Bolivia over the last couple of decades. It starts with a review of the legal framework that determines the distribution of responsibilities and financial resources to the sub-national governments (9 departments and 339 municipalities), and continues with an analysis of the evolution and distribution of financing to these entities between 2001 and 2013. It then proceeds to describe the resulting progress in social indicators between 2001 and 2012 at the municipal level, and identifies the main remaining gaps in basic services by 2012. Finally, the paper offers an analysis of the factors that are most closely associated with progress in the main social indicator used by the Bolivian government - the Unsatisfied Basic Needs index. This provides the basis for a final section on recommendations for public investment in Bolivia.
Fiscal decentralization has been established in the People’s Republic of China (PRC), but crises emerge at the local government level due to remaining problems of the fiscal administration system of tax allocation and the impact of replacing the business tax with a value added tax. The PRC taxation system requires readjustment and local governments have begun to focus on innovative financing models. The main path to stable and sustainable government finances is to maintain the general public budget and the government fund budget. The present chapter shows that use of innovative fundraising and financing channels will lead to the upgrading of local government infrastructure and public services. Suggestions for enhancing local government fiscal stability and sustainability include: reducing the fiscal burden at the local level by standardizing and legalizing outlay establishing a modern taxation system; establishing a standardized and predictable transfer payment system by introducing block transfer payments and prioritized transfer payments as a basis for a stable growth mechanism for general transfer payments; promoting public–private partnership legislation to encourage participation of social capital and maximize the multiplier effect of public expenditure; and improving the mid-term budget and debt-annexed budget and establishing a government planning mechanism for investment and debt financing of major infrastructure construction projects.
The current financial predicament of Local Government Councils and constant pressure for increase allocation has been in the front burner of Local Governments Administration in Nigeria. The focus of this paper therefore is an examination of Local Government Finance in Nigeria using Iwo Local Government as a Case Study. Data for the study were gathered from face-to-face interview, available records in Iwo Local Government, text books, lecture notes, journals, reports, seminar presentation and internet materials. The data collected were subjected to descriptive statistics (simple percentage) and content analysis. The study explored various sources of financing local governments in Nigeria. It also explained financial relationship of Nigerian local government vis-a-vis State and Federal Government using theory of decentralization. The study went further to explain financial management in Iwo L.G. Result obtained from the analysis shows that financial transfers from federal government (Statutory Federal Allocation) are the most viable and reliable source of local government revenue and that without Federal Allocation no capital project can be embarked on. Therefore, to arrest this financial situation that local government find itself, that is over dependence on federal allocation, this work submitted that local government should increase their revenue base by laying more emphasis on the internal revenue sources, especially those areas that are hitherto neglected or not been fully exploited. Keywords: Local Government, Administration, Finance, Decentralization, Nigeria, Iwo
The first Constituent Assembly (CA) was dissolved without producing the constitution. The Constitution of Nepal as Federal Democratic Republic was promulgated on September 20, 2015 by the second CA. The primary objective of this study is to review the modality presented in the new constitution on the natural resources, economic rights and revenue allocation and recommend some amendments. The study finds that the fiscal decentralization initiatives have not been successful in minimizing the political, social, economic, regional and ethnic inequalities inherent for nearly 240 years of a unitary system of governance in Nepal. The study recommends: VAT and income taxes will have to be collected concurrently at both the central and sub-national levels. Other taxes including excise duties will have to be collected by the sub-national governments which will support the expenditure responsibilities of the sub-national governments adequately in federal Nepal. Intergovernmental transfer modality has to be included in the constitution. A Federal Finance Commission (FFC) and the National Planning Commission will have to be constituted at the central level to make national level development plans and to make recommendations for additional grants and loans. A State Planning Commission (SPC) and a State Finance Commission can be established in each state to prepare state development plans and to deal with the transfers to be made to local bodies.
Indonesia has been implemented decentralization era since 2001 in order to increasing local empowerment and local capability. During this period central government gave a all of the authority to the local government excepted authority for the political, finance,national defence, justice and religion. Beside gave the authority to the local government, central government also gave the source of the financing to the local government to meet the money follows function principle. Financial stability is the most important things on the monetary area. Many theorytical background described that decentralization have relation with the local financial stability.Using statistic approach (panel data) we could be proved that decentralization have negative relation with the local financial stability and also the other variable such as population, GRDP, constriction price index and volatility of money
Ady Soejoto, Waspodo Tjipto Subroto, Suyanto Suyanto
Goal of this research is promoting human development in Indonesia through fiscal decentralization. In general, funds decentralization, economic growth, public expenditure, and a decline in total poor population in the autonomous region provide significant positive effect on human development index, thus increasing decentralization funds as balance grants to autonomous regions can be used to finance local expenditure, especially public social expenditure in education and health increased more years. Fiscal decentralization policy is instrumental in supporting the success of Indonesia's human development. In particular the research of fiscal decentralization policy yield in promoting human development as an economic overview of democracy in Indonesia counties and cities were assessed based on a review of theoretical and empirical can be concluded as follows: (1) Increased decentralization funds proven to provide significant positive effect on the amount of public expenditure. (2) Increased decentralization funds proved to have a positive effect on economic growth. (3) The increasing of total poor population in the autonomous region. (4) Regional economic growth is increased not provide significant effect on reducing total poor population. (5) Decentralized funds that transferred from central government to autonomous region proven to provide significant positive effect on human development index. (6) Economic growth provides significant positive effect on human development. (7) Public expenditure of autonomous regions provides significant positive effect on human development. (8) The decline in total poor population of autonomous region provide significant positive effect on human development. (9) In general decentralization funds policies have positive impacts on human development of each autonomous region counties and cities.
This thesis explored, in two parts, the macroeconomic impacts of exchange rate regimes (ERR), as well as the recent developments in fiscal policy and fiscal decentralization. Part I has reconsidered the role of ERR and its interplay with fiscal, monetary and tax policy. The first result that emerges (Chapter 1) is that fixed ERR can serve as a credible policy tool for stabilizing fiscal policy. However, this stabilizing effect is conditional upon the inter-temporal distribution of the costs of loose fiscal policy. In assessing the linkage between ERR and crises (banking/financial, currency and debt), Chapter 2 evidenced that the bipolar view is no longer valid, and that, crisis proneness rather depends on the macroeconomic fundamentals (the volatility of private sector credit, the deficit-financing mechanism, and the debt-to-GDP ratio). In Chapter 3, we unveiled a strong relationship between ERR and tax policy. Countries with pegged regimes have greater reliance on domestic taxation -such as the VAT- to make up for the loss of seigniorage revenue (substitution effect). Moreover, peggers tend to collect more VAT revenue to offset the shortfall in cross border taxes following the trade liberalization reform (competitiveness effect). Part II discussed the cyclical response of fiscal policy in high debt periods, and focused on fiscal decentralization issues. In Chapter 4, we showed that the reaction of fiscal policy to the business cycle is non-linear and conditional to the level of public debt. When the debt-to-GDP ratio goes beyond a certain threshold (87%), fiscal policy loses its counter-cyclical properties. Further, we highlighted that carefully-designed fiscal rules help maintaining counter-cyclicality through an ex ante disciplinary effect. Chapters 5 and 6 analyzed the impact of fiscal decentralization on the efficiency of public service delivery and fiscal policy performance, respectively. Chapter 5 revealed that a sufficient level of expenditure decentralization, coupled with revenue decentralization, improves the efficiency of public service delivery. However, the political and institutional environment is critical for reaping decentralization-led benefits. Lastly, Chapter 6 concluded that fiscal decentralization has destabilizing effect by reducing the counter-cyclicality of fiscal policy. In addition, we found that decentralization strengthens the structural fiscal balance; however, vertical fiscal imbalances reduce the benefits of decentralization. It is therefore critical to limit asymmetries between expenditure and revenue decentralization, so as to reduce the transfer-dependency of local governments to the central level, and thus prevent decentralization from weakening the fiscal stance at the general government level.
This paper considers an overlapping-generations model with pay-as-you-go social security and retirement decision making by an old agent. In addition, the paper assumes that labor productivity depreciates. Under this setting, socially optimal allocations are examined. The first-best allocation is an \nallocation that maximizes welfare when a social planner \ndistributes resources and forces an old agent to work and \nretire as she wants. The second-best allocation is an allocation that maximizes welfare when she can use only pay-as-you-go social security in a decentralized economy. The paper finds a range of an old agent’s labor productivity such \nthat the first-best allocation is achieved in the decentralized economy. This differs from the finding in Micheland Pestieau [“Social security and early retirement in an overlapping-generations growth model”, Annals of Economics & Finance, 2013] that the first-best allocation cannot be achieved in the decentralized economy.
The present theme is conditioned by the directions of public finance reform in Moldova. The aim of the research is focused on assessing the fiscal decentralization in the Republic of Moldova, aimed at: analyzing financial decentralization conceptual approaches and examining amendments to the administrative and legislative level to strengthen the level of fiscal decentralization in the country. Research methodology is based on processes and of legislative analysis, as well as on literature. As a result, it appears that in Moldova was first adopted a policy document that clearly dimensioned an action plan to achieve a qualitative decentralization in all areas and village structures. Therefore, the author conducted a comprehensive analysis of the process of reforming the central and local public administration in Moldova, presenting argumentative scientific conclusions and formulating own recommendations which would contribute to the continuity of the reform and strengthening budgetary fiscal capacity.
DOI: http://dx.doi.org/10.12957/rdc.2015.16954 Trabalho enviado em 27 de junho de 2015. Aceito em 29 de junho de 2015. Resumo O Brasil está organizado como uma federação trina desde que, em 1988, os municípios tornaram-se entes federativos. O fortalecimento institucional do Município incluiu a responsabilidade pela execução das políticas sociais, que eles são obrigados a co-financiar. Ao longo do tempo, a maior gama de responsabilidades administrativas e financeiras tem indicado os limites da descentralização das políticas públicas já que a maior parte dos municípios não tem condições de atender às expectativas criadas com o seu papel na estrutura federativa. Trata-se de um problema derivado do federalismo simétrico no Brasil, que trata igualmente todos os municípios, sem distingui-los por porte demográfico ou função na rede urbana. Esse é o contexto em que se estabelece a disputa federativa pela crescente receita que as empresas pagam ao poder público pela extração de petróleo. Tal receita deixa de ser percebida como compensação pelos impactos ambientais e sociais causados pela atividade extrativa e torna-se mais uma transferência intergovernamental aos entes federativos. Tal situação tende a torna-los todos mais dependentes desta fonte de receita e, assim, mais sensíveis aos interesses da economia do petróleo, o que diminui o ímpeto governamental na defesa da política de substituição de energia fóssil por renováveis. Palavras chave: petróleo, energias renováveis, disputa, federação. Abstract Brazil is organized as a federation in three levels including the federal union, states and municipalities since 1988 when municipalities have become federal entities. The institutional strengthening of the municipality included the responsibility for the implementation of social policies which they are required to co-finance. Over time, the larger range of administrative and financial responsibilities has indicated the limits of decentralization of public policies since most municipalities cannot afford to meet the expectations created by its role in the federal structure. It is a problem of the symmetric federalism in Brazil, which treats all municipalities without distinguishing them by population size or function in the urban network. This is the context of the dispute by the increasing federal revenues that companies pay to the government from oil. This income is no longer seen as a compensation for environmental and social impacts caused by extractive activity and becomes an intergovernmental transfer to states and municipalities. This situation tends to make them all more dependent on this source of revenue and thus more vulnerable to the interests of the oil economy, which reduces the government interests to defend the replacement policy of fossil energy by renewable. Keywords: oil, renewable energy, dispute federation
The current decentralization process escalating in Brazil since 1980 flanked by the endeavor of the democratization in the country, strengthened the role of the municipality once it was elevated to the status of autonomous federal entity by the Brazilian Federal Constitution of 1988. Upon 25 years of the given new democratic legacy, the municipal revenues increased in volume, in comparison to other spheres, due to the establishment of law and regulations accrediting new responsibilities and new obligations for the municipality. Although it was transformed into politics generator-making agent with potential to promote the local development, by means of power entitlement to be effective as well as the decision towards the design of such politics, the municipality has restricted autonomy towards political decision-making: most part of the resources tend to be transferred to a pre-defined destination via legislation or in the several programs set by the central government. Thus, public expenditures are increasingly as much as to be defined by federal rules as well as financial releases by conditional transfers to sectorial funds, restricted, in practice, to the autonomy of the local expenses. Henceforth, this essay is focused on the contribution to the debate about the possibility of municipal administrations to perform fundamental role of promotions of local development, with greater citizen participation and reduction of social inequalities of which surrounds Brazil, by highlighting elements for the proper analysis of the decentralization process towards the impact of public finance and municipal autonomy.
Public sector viewed as important with its numerous functions for a long time has recently become the locus of criticisms by many due to its unproductive and excessive size. One of the most emphasized factors which downsizes the public sector and makes it more efficient is the decentralization, moving more weight of this sector towards local administrations. There in fact, exists some predictions of how decentralization, leaving more of the public services and revenue sources to finance them, to sub-national government provides discipline in public sector. In this study, the disciplinary effects of decentralization on the public sector is tested using panel corrected standard errors procedure and the from OECD countries. The results show that decentralized public services and taxes up to some degree, limits the growth of public sector
Local Government finance is of immense importance for a state and for the government functions of rendering services to the citizens. Local finances reflect the fiscal independence of municipalities and the financial capacity to carry out its responsibilities under the legal provisions of the central government. It is therefore very important to monitor the development of local finance in transition countries and in transferring experiences from countries with higher fiscal decentralization to countries which are pre-accesion candidates to EU. Countries with higher fiscal decentralization are more acceptable bycountries that are recently new members of the European Union under similar region. In this study, a parallel overview of the local finances of new member country in the EU, Slovenia and pre-accesion candidate country to the EU i.e. Macedonia, was taken
This PhD thesis falls within the fields of public finance and public choice. It studies the following issues: ideological polarization, decentralization and conflict. It consists of three chapters can be read independently.
In the first chapter the focus is on the importance of ideological polarization between but also within political parties on the level and composition of cantonal public spending. The analysis is on Swiss cantonal parliaments and is based on the use and econometric treatment of a very rich database. We made two contributions to the literature on the impact of political fragmentation on public spending. First, we showed that ideological dispersion within political parties is associated with higher public spending while the dispersion between political parties is associated with less public spending. This finding implies that the mode of organization and discipline within political parties are both important. This result is particularly interesting given that previous literature has completely abstracted from ideological dispersion within political parties. Lastly, we showed that ideological dispersion between and within political parties is mainly relevant for current expenditures.
The second chapter focuses on the conflict of objectives that may exist between economic agents in a two-stage game with asymmetric payoffs. The literature showed that coordination failures are frequent in one-stage games and that communication can help individuals coordinate with the use of take turn strategies that allow for a reduction in the payoffs’ inequality in the long run. Our contribution was to study whether communication has the same capacity in a two-stage game where the subgame perfect Nash equilibrium requires both players to make opposite choices at both stages of the game and accept unequal payoffs. Our results show that coordination failures occur half of the time and that 18% of the pairs use the take turn strategy. Communication significantly increases coordination on the subgame perfect Nash equilibrium because it increases the ability of subjects to initiate a take turn strategy and to maintain it. Thus, communication allows subjects to establish a long-term strategy that increases efficiency and reduces payments differences, induced by the asymmetry in payoffs, by exchanging their relative positions in a fair way. Our results show that communication can solve coordination conflicts, even in more complex situations than in one-stage games usually studied until now.
The last chapter focuses on a particular type of conflict: political secessions. Specifically, it addresses the link between secessions, decentralization and group identity. We aim at determining, by means of a laboratory experiment, if decentralizing the provision of public goods reduces the likelihood of secession. We emphasize the importance of local identity. Our experimental design, obviously, do not reproduce all the trade-offs that separatist movements face in the real world. It allows, however, capturing at least two key forces that drive these movements: the proximity to public goods that reduces the phenomena of free-riding and brings public goods closer to citizens’ preferences and the importance of local identities. Our results indicate that the Decentralization treatment increases contributions to local public goods and decreases the likelihood of secessions also when identity is made more salient. If fact, reinforcing local group identity increases the likelihood of secession only when local group members are cooperators.
This thesis brings out the important roles that the public sector finance and reforms play in shaping nations' welfare through providing empirical evidence using new data sets on the links between government spending and inflation, and between fiscal decentralization and development outcomes for the four Asian emerging economies of India, China, Indonesia and Vietnam. Chapter 2 empirically tests the nexus between government spending and inflation for the three countries of India, China and Indonesia utilizing the cointegration and the Vector Error Correction Model (VECM) method on time series data for the period 1970-2010. This chapter employs a bivariate VECM of government spending and inflation and, to address potential endogeneity concerns, two trivariate models with real GDP and nominal exchange rate separately added. The results show a cointegrating long-run relationship between government spending and inflation and that, in the short run, government spending can significantly influence the rate of inflation (positively for India and Indonesia while negatively for China). An important policy implication is that governments in the region would need to be more prudent regarding decisions to change government spending, which can potentially result in large fluctuations in inflation. Chapter 3 shifts the focus to fiscal policy matters at sub-national levels. This chapter examines the effects of fiscal decentralization on economic growth at the provincial level in Vietnam, an Asian economy with rapid growth performance resulting from the comprehensive reform, 'Doi Moi', starting in 1986. Using a newly available provincial-level dataset spanning the period 2004-2010, this chapter provides evidence that fiscal decentralization has had a significant and positive impact on provincial economic growth in Vietnam during the period of analysis. The measure of fiscal decentralization adopted captures both the fiscal capacity and autonomy of provinces. The fixed-effect and the Generalized Methods of Moments (GMM) models help address the unobserved heterogeneity and potential endogeneity issues. Finally, Chapter 4 further quantitatively investigates the effects of fiscal decentralization on development outcomes. Specifically, the two main hypotheses to be tested in this chapter are whether fiscal decentralization had significant effects on poverty outcome and health outcome at the provincial level in Vietnam during the period 2006-2011. Given the important role of the agriculture sector, the chapter also tests for other hypotheses that are concerned with sectoral growth patterns, the contribution of agricultural growth to poverty reduction, and the urban-rural gap in poverty. The main results suggest that fiscal decentralization had a positive effect on health outcomes but, surprisingly, did not contribute to poverty reduction. Another finding is that agricultural sector has made a significant contribution to poverty reduction in dominantly agricultural provinces. Also, the poorer regions have benefited from agricultural growth more than growth in other sectors. Finally, the chapter does not find significant evidence for the urban-rural gap for poverty in Vietnam. On balance, from a policy maker's perspective, while growth-enhancing effects are encouraging, the potential distributional effects of fiscal decentralization warrant careful considerations of the reform agenda so that the poor and the disadvantaged can share the gains in potential benefits.
This dissertation contains three chapters and focuses on the optimal design of fiscal policy, both from a theoretical and from a quantitative perspective. In the first chapter, “Wealth Taxation and Life Expectancy,” I address the optimal taxation of wealth in a class of dynastic overlapping-generations economies with heterogeneous mortality risk. Working individuals are indexed by skills which are private information. Skills not only determine earning abilities but also correlate with survival probability, so that more productive agents on average live longer. The analysis distinguishes between the tax treatment of two possible sources of wealth, namely, savings and bequests, and points to the mortality gradient as a crucial determinant for optimal wealth taxation. Specifically, due to differential mortality: (a) earned wealth should be marginally taxed, (b) transferred wealth via bequests should be marginally subsidized, and (c) marginal tax schedules on bequests and inter-vivos transfers should be separated. I calibrate the model to U.S. data and quantitatively evaluate its tax implications. For the median worker, mortality differences create a force for marginally taxing capital mortality differences create a force for marginally taxing savings by up to 1.7%, and for marginally subsidizing bequests by as much as 3.4%. These figures are robust to the value of the societal intergenerational discount factor and can yield significant welfare gains. In the second chapter, “Taxing Atlas: Using Firm Data to Derive Optimal Income Tax Rates” (joint with Laurence Ales and Jessie J. Wang), we analyze the optimal taxation of top labor incomes. Top income earners are modeled as managers who are heterogeneous across skills and operate a span-of-control technology, as in Rosen (1982). Managers privately observe their skill level, which increases the productivity of both effort and supervision, thus creating a scale-of-operations effect. We characterize optimal taxes in this environment and identify novel determinants linked to firm technology. Our main result is that to be consistent with U.S. firm data, the optimal top income tax rate should be roughly in line with the U.S. tax code, in contrast to previous results in the literature. In the third chapter, “Regional State Capacity and the Optimal Degree of Fiscal Decentralization” (joint with Martín Besfamille), we study the optimal degree of fiscal decentralization in a federation. In our environment, regional governments are characterized by two dimensions of state capacity; namely, administrative and fiscal. These gauge the ability to deliver public goods and to raise tax revenues, respectively. Two regimes are compared: partial and full decentralization. Under partial decentralization, regional governments have no tax powers and rely on central bailouts to refinance incomplete projects. Under full decentralization, regional governments refinance incomplete projects through capital taxes, in a context of tax competition. We show how the optimal degree of fiscal decentralization hinges on the relative magnitudes of each type of capacity. Specifically, for sufficiently low levels of fiscal capacity, bailing out regional governments is optimal regardless of the level of administrative ability. However, a combination of low levels of administrative capacity and high levels of fiscal capacity calls for fully decentralizing tax powers.
Luis Andrés, S. A. Dan Biller, Matías Herrera Dappe
If the South Asia region hopes to meet its development goals and not risk slowing down or even halting growth, poverty alleviation, and shared prosperity, it is essential to make closing its huge infrastructure gap a priority. Identifying and addressing gaps in the data on expenditure, access, and quality are crucial to ensuring that governments make efficient, practical, and effective infrastructure development choices. This study addresses this knowledge gap by focusing on the current status of infrastructure sectors and geographical disparities, real levels of investment and private sector participation, deficits and proper targets for the future, and bottlenecks to expansion. The findings show that the South Asia region needs to invest between US$1.7 trillion and US$2.5 trillion (at current prices) to close its infrastructure gap. If investments are spread evenly over the years until 2020, the region needs to invest between 6.6 and 9.9 percent of 2010 gross domestic product per year, an estimated increase of up to 3 percentage points from the 6.9 percent of gross domestic product invested in infrastructure by countries in the region in 2009. Given the enormous size of the region's infrastructure deficiencies, it will need a mix of investment in infrastructure stock and supportive reforms to close its infrastructure gap. One major challenge will be prioritizing investment needs. Another will be choosing optimal forms of service provision, including the private sector's role, and the decentralization of administrative functions and powers.
Cinzia Di Novi, Massimiliano Piacenza, Silvana Robone, Gilberto Turati
This paper aims at investigating empirically the impact of fiscal decentralization reforms on inequality in well-being. In particular, we look at the effects on health inequalities following the assignment of larger tax power to the Italian Regions for financing their health expenditure, starting from the end of the Nineties. Exploiting large differences in the size of the tax base across Regions, we find that fiscal decentralization processes that attribute a greater tax power to lower government tiers, besides reducing inefficiencies of healthcare policies, seem to be effective in reducing also within-regional disparities in health outcomes. However, the degree of economic development � on which depends the actual fiscal autonomy from Central government � significantly affects the effectiveness of these reforms and highlights the importance to take properly into account the specific features of the context where the decentralization of power is implemented.
Recent theoretical research suggests that financing sub-national governments’ expenditure out of own revenue sources is linked to more responsible budgeting, because the financial implications of spending decisions then are internalized within a jurisdiction. We test this proposition empirically on a sample of 23 OECD countries over the 1975-2000 period, and find evidence in line with the hypothesis that greater revenue decentralization (measured as sub-national governments’ share of own source tax revenues in general government tax revenue) is associated with improved sub-national government budget deficits/surpluses. This finding is cross-validated with a novel, independent dataset consisting of all 34 OECD member states from 2002 to 2008.
Democratic movements, market mechanisms, and decentralization reforms have been at the heart of transformation of former USSR republics. Republic of Moldova was not an exception. The initial argument behind such fascination with these reforms stems from the idea that market mechanisms in an open and democratic society will facilitate the efficient and effective resources’ allocation, compensating for interim distributive inequities and macro-economic challenges. Such a natural experiment has been in progress for more than 20 years in the Republic of Moldova. During these 20 years Moldova experienced democracy in its infancy, democratic return of communism, and once again return to democracy and its core ideas and values. Public administration system along with public finance and budgeting systems experienced comparably abrupt changes in their development. This qualitative study of Moldovan public administration and finance frameworks will provide an evaluative description of these three distinct, but interrelated periods in Moldovan history of independence and development of public administration and public budgeting systems. Such description will allow for evaluation of the public administration and public finance systems’ developments in Moldova as well as reasons of success and failure of these reforms.
The sustainable development became a goal for knowledge society, but one of the main question in literature remains as how close is the relationship between economic dvelopment, knowledge society and local governments' level. Given the great diversity of situations and frameworks both across countries and within them in the European Union, I consider that each country must have own policies designed to implement process of decentralization with the commitment of "healthy" economy in a society dominated by the technology and innovation. In this context, the problem occurs in decentralization should be managed on two levels: on the one hand in terms of central-local budgets relations, and on the other hand, in the local public finance structural plan. The paper will try to emphasize the connection between decentralization, local economic sustainable development and knowledge society, taking into account an overview of this three aspects and empirical evidences. In this regard, I will use the background offered by literature and the official statiscal data for analysis to identify the variables which explain decentralization and local economic development in the knowledge society. I estimate the analysis to confirm the hypothesis that there are good aspects, but also deficiencies that require solutions and budgetary policy options as part undisputed positioning local government finance as an engine of development of the whole nation. I consider that the paper can be a useful viewpoint in understanding local public finances in decentralization, which allows researchers to include other sources of information for researching an in a much more complex approach.
The changes in the system of intergovernmental fiscal relations in Bulgaria commenced at the beginning of the 1990s with the enactment of legislation on local self-governance and the first timid attempts at an expenditure and revenue assignment between the levels of government. The process began to gather momentum in 2002 when the government adopted a Concept paper on fiscal decentralization and an action plan on its implementation. A number of key reforms were legislated with the aim of broadening the municipal own-sources revenue base and increasing local government revenue autonomy. Dedicated action to set a decentralized public finance system in place resulted in a visible improvement of financial self-sufficiency of local authorities. Although still low in a European context, the values of fiscal decentralization indicators have gradually risen over the years, which is indicative of the success of the reform. The purpose of this paper is to overview the development of the process of fiscal decentralization in Bulgaria in the period 2003-2012 through examining its key aspects – expenditure responsibilities, revenue assignment and intergovernmental transfers – and to assess the policy options for addressing the current problems of local finance system. DOI: 10.5901/mjss.2014.v5n23p342
This dissertation aims to explain the nature, cause, and consequence of informal fiscal decentralization in China since 1994. The 1994 tax reforms intended to strengthen the central government taxing power by increasing tax revenue through the tax assignment system. China also prohibited local government debt taking, while increasing intergovernmental transfers between the central government and local government. These series of China's centralization reforms in 1994 have realized uneven success. Central government tax revenue was improved significantly. However, local government still takes debt through the financial platform companies. The increased intergovernmental transfers did not decrease regional disparity, which is one of the goals of the central government. These are the unintended consequence of the centralization reform that this study tries to account for. This study shows that revenue centralization unintentionally aggravates problems of local public finance. While maintaining the budget balance according to budget law, local government has carried out competitive economic growth and expenditure management. The ability to manage expenditure and attract investment is the criteria employed to evaluate the accomplishment of local leaders. This study finds that prohibition of local government debt in China is constrained by their social network. This norm influences the strategy of local governments to increase their debt taking beyond the realm of formal rules under the competitive environment. This study also demonstrates that centralization of revenue made local governments increasingly resort to intergovernmental transfers, which in turn fail to reduce inequality across jurisdictions. This study argues that an informally decentralized state reduces the merits of the decentralization. The informal consequence of the political and fiscal systems in China result in local leaders that acquire the medium level of change in power, while pursuing fiscal decentralization and maintaining political centralization. However, the unintended consequence is the retreat of the fiscal system, such as the increased fiscal instability and large gaps across jurisdictions.