The implementation of fiscal balance policy is done through budget allocation for local governments, include balance fund. Furthermore, the policy has also been meant to reduce imbalance fund resources between central and local governments and to minimize fiscal gap among local governments as well. The general allocation fund (DAU) is allocated with aim to even distribution of financial capability interregional. The allocation is to finance local governments' need regarding implementation of decentralization system. The use fund is adjusted to priority and need each local government (block grant)
Abstract If fiscal decentralization promotes growth, why do some regions decentralize more than others? This article identifies the growing divergence of fiscal centralization among Chinese cities and explains it in a public finance framework. It argues that fiscal decentralization and its economy‐liberalizing effect entail significant short‐term fiscal risk. The more a locality relies on uncompetitive business ownership for fiscal revenue, the less likely fiscal decentralization is to occur. This article compiles a dataset of 20 provincial capitals between 1999 and 2016 to test for the connection between a city's tax base and its fiscal centralization level. It then pairs two “most similar” cities to trace how fiscal security concerns drove their fiscal and economic policies apart. This article adds a micro‐level perspective to the literature on fiscal federalism. By pointing out the fiscal constraints confronting local governments, it offers a new angle to understand the different growth paths of Chinese cities.
There isn´t general consensus concerning the tools for evaluating of decentralization and public administration reforms. Comparison of impacts and tools for the evaluation of decentralization process is complicated mainly by a different arrangement of public administration, researching only partial aspects of decentralization or lack of key data. The aim of this paper is to legitimize the innovative approach of evaluation of the decentralization reforms through an analysis of subnational units´ staff. This consideration is based on correlation which suggests that countries with a higher degree of autonomy of subnational units usually have a wider bureaucratic apparatus of self-governments. In this context we answer whether the evaluation of Czech decentralization is relevant through an analysis of self-governmental staff and under which methodological preconditions. We worked with fragmented statistical unique and unpublished primary data about the self-governmental staff obtained from registers of the Ministry of Interior, the Ministry of Finance and the Czech Statistical Office.
Luis Ayala Cañón, Ana Herrero Alcalde, Jorge Martínez-Vázquez
This paper analyzes the determinants of welfare benefit levels within a highly fiscally decentralized context. More specifically, we analyze the role of mimicking as a driver of the institutional design of subnational government policies in the absence of federal co-ordination and financing. Empirically we focus on the welfare benefit programs of Spanish regional governments during the period 1996-2015. Our results strongly support the significant role played by mimicking: regional public agents observe what their peers are doing and act accordingly, and this takes place even in a context of low mobility of households. Moreover, we find evidence of vertical externalities: even in a completely decentralized framework, regions consider the benefits set by the central government as a benchmark when determining their own welfare benefit levels
Le Vietnam est un Etat-Parti administrativement centralisé. Fruit de l'Histoire du pays, cette centralisation administrative se conjugue pourtant malaisément avec l'urbanisation exponentielle des villes vietnamiennes. Moteurs de la croissance du pays et cœur de son attractivité économique depuis la politique du Đổi mới à la fin des années 80, les villes vietnamiennes connaissent pourtant d’importantes difficultés, liées au manque de décentralisation (administrative et financière) et au maintien d'une forte présence de l'Etat central. Cette décentralisation, inaboutie, est pourtant nécessaire pour, d'une part, gérer les phénomènes complexes découlant d'une urbanisation rapide et peu maitrisée (exode rural, gentrification, périurbanisation, extension des limites administratives des villes, gestion du foncier, accès aux services publics de base en milieu urbain, déplacements et transports, préservation des biens publics, qualité de l'air, logement, préservation de l'environnement, du patrimoine historique et culture, lutte contre les effets du changement climatique) et, d'autre part, le financement des infrastructures urbaines nécessaires au développement du pays et à son attractivité économique, pour lequel les besoins sont colossaux. Nous partons du principe que les collectivités locales, au Vietnam (en ce compris gouvernements locaux, sections locales du Parti communiste, sociétés publiques locales, opérateurs d’aménagement urbain publics) doivent constituer le support de la prise de décision, de l’action et du financement du développement urbain. Nous chercherons donc à répondre aux questions suivantes : Quel degré de décentralisation les collectivités locales vietnamiennes nécessitent-elles pour appréhender au mieux les phénomènes urbains ? Quel cadre juridique de gouvernance locale est nécessaire ? Quelle organisation administrative et quelle articulation entre échelons centraux et locaux en matière de développement urbain ?Notre étude cherchera à traduire juridiquement la place que les collectivités locales ont prise économiquement et socialement. Le but du présent travail de recherche est donc d’abord de démontrer en quoi les phénomènes urbains nécessitent des réponses avant tout locales puis d’analyser le cadre juridique qui entoure la prise de décision et le financement en matière de développement urbain. Ce travail s’inscrit donc dans une vision à la fois juridique et extra-juridique puisque des rapports incessants seront établis entre des phénomènes non juridiques (le développement urbain) et la réponse qui leur est apportée par le droit.
India is a federation whose roots can be found in the colonial period. Indian federal setup is clearly divided between centre, state and local government and likewise, the sources of revenue and responsibilities are also divided between them. The decentralization process in India is asymmetrical in the sense that decentralization of expenditure has been much more than the revenue decentralization as provided by the Constitution, thereby creating an imbalance in states’ income and spending. When this mismatch between the two is measured at different levels of government, we call it Vertical Fiscal Imbalance. In this paper, I have presented various definitions and measures of VFI given by several economists over the years and tried to measure the extent of VFI that exist in India since 1990-91 to 2014-15. We have used twenty five years data to make an analysis based on the data available in Finance Commission reports and Indian Public Finance Statistics. Our results show that the amount of revenue that has been decentralized over the period of study falls much short of the expenditure requirements that are expected to be met by the state governments. The situation is so intense that the state governments are left with no option other than relying on central transfers for financing their needs and that where the central government enjoys an upper hand and an authoritative power over the internal matters of the states. KEYWORDS: Expenditure, Decentralization, Indian federation, Revenue, Vertical Fiscal Imbalance.
The aim of this paper is to analyze how limits in revenue and spending autonomy of sub-sovereign governments influence their decisions. Revenue and spending autonomy indicators for Polish towns were established and used in analysis on school education expenditures during 2003–2016. The influence of limits on revenue autonomy on municipal spending has been extensively addressed in both theoretical and empirical literature. However, studies related to spending autonomy are rare. The analysis presented in this paper suggests that when limits exist in spending autonomy, more decentralized tasks are crowded out by regulated obligations. That is why the spending autonomy analysis is important to evaluate the equity between local units and the adequacy of local revenues to decentralized expenditures.The basic principle of local finance is that there should be an adequate relationship between the financial resources available to a local authority and the tasks it performs. However, in practice, the assessment of whether this has been achieved is very difficult. Often, only problems with the solvency of local governments indicate that we are dealing with a poorly constructed system of local finances. The expenditure autonomy indicator proposed in this article is a tool that provides a way to indicate problems with the adequacy of revenues before such anextreme situation occurs.
Fiscal decentralization aims to improve regional finance independency and reduce the fiscal dependency of central goverment. However, in practice, there are many areas that still rely on the assistance central finance for their regional development.This research aims to discuss the development of regional finance independency and analyze the influence of regional finance independency on poverty in Banten Province. This research uses descriptive method and panel data on 6 (six) regencies and cities in Banten Province at 2001-2011. The poverty model showed negative effect of regional finance independency on percentage of the poor and positive effect of balance fund’s ratio on percentage of the poor. Income inequality index and unemployment rate have positive effect on the percentage of the poor. Evalution for the allocation of the fund balance and development policy are needed to reduce inequality of income distribution.Keywords: local revenue, economic growth, povertyABSTRAK Desentralisasi fiskal bertujuan untuk meningkatkan kemandirian keuangan daerah dan mengurangi ketergantungan fiskal terhadap pemerintah pusat, namun pada pelaksanaannya masih banyak daerah yang bergantung pada bantuan dana pusat untuk pembangunan daerah. Penelitian membahas perkembangan kemandirian keuangan daerah dan pengaruhnya terhadap kemiskinan di Provinsi Banten. Penelitian ini menggunakan metode deskriptif dan data panel pada 6 (enam) kabupaten dan kota di Provinsi Banten tahun 2001-2011. Hasil penelitian menunjukkan kemandirian keuangan daerah berpengaruh positif terhadap peningkatan persentase penduduk miskin, sedangkan rasio Dana Perimbangan berpengaruh negatif terhadap persentase penduduk miskin, indeks ketimpangan pendapatan dan tingkat pengangguran terbuka berpengaruh positif terhadap persentase penduduk miskin.Implikasi kebijakan yang dirumuskan adalah perlunya dilakukan evaluasi kebijakan alokasi penggunaan Dana Perimbangan dan kebijakan pembangunan untuk mengurangi ketimpangan distribusi pendapatan.Kata Kunci: Pendapatan Asli Daerah, pertumbuhan ekonomi, kemiskinan
Xinhua Zhu, Yigang Wei, Yani Lai, Yan Li · 6 authors
“Land finance” refers to the key fiscal strategy in which local governments in China generate revenue through land grant premiums and land tax revenues. A burgeoning body of literature has focused on the driving factors of China’s land finance from different aspects including fiscal decentralization, revenue decentralization, competition among local governments, land marketization, infrastructure development, and economic development. However, little research has provided a comprehensive perspective integrating social, economic and institutional aspects to investigate the driving forces of these unique and profound issues in China. This study aims to investigate the driving factors and working mechanism of land finance. A theoretical and empirical model was proposed using soft budget constraint theory and least squares structural equation modeling (PLS-SEM). The panel data of 35 Chinese major cities were assessed between 2006 and 2015. The empirical results contend the following: (1) the land transfer and fiscal systems provide the key impetus for land financing because the land transfer system forms a stable modality, and the fiscal system is an important incentive for land financing; (2) the effects of the economic development and political system are insignificant; and (3) the political and land systems significantly influence economic development. Our contributions focus on two aspects. Firstly, a comprehensive framework of factors germane to land finance is constructed. Secondly, a new research methodology for land use study is proposed. To the best of our knowledge, the current study is the first to employ the PLS-SEM method to delineate and verify the influence paths between multiple driving factors and land finance in different cities. Hence, research reliability can be improved.
When economy grows, and resident’s needs are diversifying, finance starts to become decentralization of power as a result. The offer of the public service by the centralized government is suitable to unify the citizen’s preference of the wide area, but what the local government where inhabitants are the nearest carries is desirable for the offer of the community service in a small range(Oates’s decentralization theorem). On the other hand, it becomes to cause the difference of various public services in each area in fiscal decentralization. Therefore, it is important how we measure progress of the financial decentralization in each area and the financial decentralization of power difference between each area. The purpose of this report analyzes economic and fiscal decentralization disparities in China from the measurement of the tile index based on the data of “the Chinese statistics summary (2000 through 2007)” before and after the western great development, at the same time it analyzes whether the relation between economy and financial decentralization is correlative, in other words, Oates’s decentralization theorem is concluded in Chinese economy. As a result of analysis, following three points were confirmed. 1. Expenditure decentralization disparities and difference of the district production per capita have positive correlation. Therefore, Oates’s decentralization theorem may be concluded. 2. However, when I consider population movement, Fiscal empowerment disparities and difference of the district production per capita have negative correlation. As a result, when I consider the side political, Oates’s decentralization theorem may not be concluded. 3. In the major cities of the coastal place such as Beijing and Shanghai, as for the growth rate of expenditure decentralization and the original expenditure decentralization, these coefficients of correlation were negative. Oates’s decentralization theorem is not concluded in these cities, and it is predicted that a factor except the finance strongly works for economic growth.The conclusion whether or not Oates’s decentralization theorem was concluded remains much more vague by the complicated political economic system in this way in China.
Abstract This research aims to examine the effect of fiscal decentralization on financial performance by adding government size as the mediator variable and audit opinion as the moderator variable of counties and cities in Lampung Province. Lampung Province is the center of economic mobility in South of Sumatera Island so it can impact well to regional autonomy implementation and has the best financial statements (an unqualified opinion) in Sumatra Island (47.5%). This research was conducted in 13 counties and 2 cities in 2010-2013 for the objective to see the regional autonomy implementation started in one decade. The examination of hypothesis used to Partial Least Square with the significant of decision-making <0.10. The results show that fiscal decentralization gives the positive and significant effect to financial performance but non-significant effect to government size; government size gives the positive and non-significant effect to finance performance; and fiscal decentralization gives the positive and non-significant effect to finance performance with the audit opinion as the moderator variable.
Urban public finance is a hidden force shaping cities and their development. This thesis draws attention to the powerful insights which can be gained from studying cities through a fiscal lens. It argues for an interdisciplinary and relational approach which infuses the fiscal study of cities with political and social interpretations of urban dynamics. Accounting for the city through two very different registers, this thesis draws from urban public finance and from critical scholarship on urban infrastructure. The conventional urban public finance literature is largely technical, produced by urban policy and fiscal experts. In contrast, social and political theorization on urban infrastructure provides a critical reading of the technicist approach and contributes to the refinement of key theoretical concepts within urban studies. There are many incommensurabilities between these two scholarly registers. They have different framings of politics, technical knowledge, and the priorities for change. However, there are several shared interests. They are both concerned with urban institutions, urban places, and the necessity for change. These shared interests provide the foundation for a revised approach to the fiscal study of cities. This synthetic approach is spelled out in a series of conceptual and methodological propositions. The first proposition is the device of the C/city, which distinguishes between an urban settlement (the small ccity) and its governing authorities (the big-C City). The C/city device foregrounds the importance of the city, the City, and the fiscal relationships which operate at the intersections between them. The second proposition frames urban public finance not just as a means of financing urban infrastructure but as an infrastructure itself. Drawing from the infrastructure scholarship, the concept of 'configurations’ is deployed creatively to trace fiscal histories, instruments, and relationships. The third proposition is the importance of grounding inquiry in particular places. To address this, the case study method is used. The case method allows for the use of a variety of types of data and analytical tools, grounded in contextualized experiences. The fourth proposition presents Kisumu, a secondary city in Kenya, as an exemplary case for exploring fiscal C/city configurations. Kisumu provides a useful case for wider generalization precisely because it is an ordinary (African) city. Not only is Kisumu on the margins of Western theorization, its unsensational nature also excludes it from dominant discourses on African cities. However, historically, administratively, and politically, Kisumu has many parallels with smaller urban centers in British East Africa and beyond. It provides a fascinating and widely relevant case of the differentiated nature of fiscal decentralization processes and dynamics. There is much which can be learned from Kisumu and its fiscal story. The bulk of this thesis is dedicated to unpacking the Kisumu case. First, there is a focus on the City. This includes tracing the historical development of Kisumu’s urban institutions and unpacking the ways in which the contemporary City shapes and is shaped by public finance. This is followed by a deeper exploration of particular city infrastructures and their fiscal configurations. The fiscal configurations related to property rates, the corporatized water utility company, and transport finance are traced and exposed. The Kisumu case provides a series of valuable insights. First, it demonstrates the potential and limitations of conventional fiscal analysis. The limitations posed by accounting are particularly important in the context of Kisumu, where the C/city has many misalignments. Second, it makes the case for reading public finance as an urban infrastructure. The process of tracing fiscal configurations illuminates the social, political, material and technical dimensions of public finance. Third, it draws attention to the de facto challenges and complexities related to decentralization (and in fact, the unique recentralization which Kenya has undergone). This includes how the sub-national urban state is constructed and deconstructed, over time and in complex ways. Fourth, it foregrounds the fiscal functionaries whose practices shape the everyday operations of the public finance system. These actors shape fiscal configurations. However, they are often hidden in conventional fiscal analyses. Fifth, it reads the practices of fiscal functionaries as a micro-politics of the state. The heterogeneity of the state and multidimensional nature of power are foregrounded. Finally, the case highlights the challenge of urban infrastructure finance in the context of a post-networked city. It shows the necessity of moving beyond common academic and policy tropes related to infrastructure and services. Collectively, these insights provide a compelling case for urban studies to more deeply engage with the fiscal C/city, in Africa and beyond.
The modern treasury system is the core component of the modern fiscal institution, but it draws little attention and is rarely discussed by domestic academics, until the now-present there still lacks of appropriate discourse. In practice, the functional imbalance of the current treasury system in China is very obvious. One prominent problem is the looseness and vulnerability of budget execution control, which has given rise to the ubiquitous phenomenon of public fund precipitation, frequent budgetary adjustment, tardy payment schedule, and cash rationing. Another problem is the high-level decentralization of government cash balance caused by indiscriminate special fiscal account setup，and the decentralization has greatly weakened the core functions of the national treasury. This paper will clarify two core propositions of institutional reform of the state treasury, including the whole-process budget execution control based on the expenditure cycle, and the government cash management based on the centralization of cash balances. It is expected to construct an appropriate framework of the assignment of power and responsibilities for the treasury system, and promote the deepen reform of the state treasury, building up the coordinating roles of the Ministry of Finance and the People’s Bank of China in the modern fiscal institution and supporting the modern treasury system functions.
Local government reform has been acknowledged to be one of the biggest successes of political transformation in Poland. Municipalities (gminy) gained strong powers and are now responsible for many public services of crucial importance to local communities. The districts (powiaty) and provinces (województwa) were also given important competences in the fields of public services and the responsibility for their development. Their autonomy is guarded by legal, institutional and financial guarantees and strong local leaders. The carefully designed institutional framework of local and regional government seemed to be permanent and durable, guaranteeing strong decentralization and providing local and provincial authorities with substantial decision-making powers and responsibilities for a vast majority of public services.Such a broad field for the functioning of the local government does not remain without interpretation problems. The consecutive central governments were finding common ground in their instrumental approach to local authorities' independence. It was convenient for the state to decentralize problems and challenges, while keeping control over finance and other resources, as well as looking for ways to increase supervisory powers over local government. Almost 30 years after the reintroduction of territorial self-government in Poland, it is expected to be well rooted in the constitutional system of Poland, but is it really so?
An urgent task today is to strengthen the importance of property taxation, measured not only by quantitative indicators, but also by the correct perception of tax by local authorities. The scope of the research is the development of the process of fiscal decentralization in Russia. The subject of the study is the relationship of the principle of benefits in property taxation with the process of fiscal decentralization at a local and regional level. The employed research methods include logical analysis, the descriptive method and systematic presentation of the results of statistical analysis. The aim of the article is to study the importance of property taxes for the implementation of fiscal decentralization in Russia. As a result of the calculations, it was concluded that there is a tendency toward an increased financial dependence of local governments and increased centralization at the local level. It is shown that increasing transfer dependence and increasing centralization at the level of administrative centers of the regions while reducing gratuitous assistance at the regional level indicates a concentration of resources around the regional capitals and a decrease in financial support for smaller areas. The author proposes that the benefit principle in the property taxation system in Russia should be introduced and proves the possibility of doing that. The principle implies the transfer of property taxes to the targeted category, when tax revenues are directed toward specific items of municipal expenditures. The ultimate goal of introducing the principle of benefit is to increase the responsibility of local authorities regarding the efficient provision of municipal public goods, highlight the importance of property taxes and strengthen fiscal decentralization at the local level. To determine the potential ability of property taxes to fulfill the target function, a ratio of municipalities’ fiscal self-sufficiency was proposed and calculated, which allows one to determine the share of net expenditures of budgets subject to financing with property tax. The input data for the study was borrowed from statistical data on the execution of regional and local budgets, as well as tax revenue reports of tax authorities.
The real estate industry has been one of China’s pillar industries over the last two decades, but soaring housing prices and overheated investments have hindered the sustainable development of the economy. Land transfer fee is a critical determinant of housing prices under the current land reserve system in China and also the main revenue resource for local governments. The reliance of local governments on land-leasing fees as their dominant source of revenue is usually referred as “land finance”, which started from fiscal decentralization and tax sharing reform in 1990s and created a mismatch between revenue distribution and expenditure responsibility for local governments. Therefore, against the background of tax sharing reform, this study analyzes the hypothesis that the degree of fiscal decentralization and the land finance phenomenon are important factors causing China’s soaring housing prices. In addition, land finance is the intermediate variable linking tax reform and high housing prices. Using panel data covering 31 provinces and municipality cities in China from 2000 to 2009, the research finds that enlarged fiscal decentralization caused by the reform of the tax-sharing system is an indispensable institutional factor leading to the rapid rise of housing prices. This study presents a comprehensive influence mechanism of fiscal decentralization on housing price, contributing to the understanding of local governments’ behavior and provides recommendations for the future urban development.
The ongoing processes of decentralization, which are present in many countries, cause a growing proportion of public funds to be collected and spent at the local government tier, which necessitates the use of fiscal rules not only at the state level. This issue may raise some controversy due to the specific character, autonomy and empowerment of local government and local communities. Therefore, the analysed subject is based on three questions: 1. Limited fiscal autonomy of local self-government and it's consequences 2. A real need for and the scope of the use of fiscal rules in local government finance, 3. The informal factors that directly determine the indebtedness in local governments in the light of literature and selected empirical research. We use a descriptive method supported by an analysis of financial data and a case study as it presents selected aspects of Polish experience in the subject matter. The results of the analysis seem to point to the necessity of the use of fiscal rules in local government finance, which paradoxically strengthens the processes of decentralization, democratization, technological advancement and globalization. Some primary results of our research indicate investment expenditure, own revenues, number of companies (level of GDP) and election cycle as important, significant factors (in statistical meaning) effecting the local deficit and debt. The conclusions list the advantages of the use of fiscal rules at the local government tier and large diversity of informal conditions across the whole country.
The subject of this paper is city municipalities, one of the forms of local government at the lowest level in cities. The process of urbanization, the expansion of cities and the emergence of new ones, creates the need for internal decentralization. Decentralization comes when there is a need and it is estimated that another, lower level of government will perform more efficiently certain jobs. Due to the large number of inhabitants and the growing territory, the big cities are often organized two-step. Municipalities are the result of decentralization and are part of the territorial organization of cities. Although they are not units of local self-government, they have their own administration and affairs delegated by the city government from its own competencies. The regulation of city municipalities, their jobs and the way of financing, as well as a review of comparative solutions in the region, are the main issues discussed in this paper.
Raúl García-Gómez, Jorge Onrubia, Antonio Jesús Sánchez Fuentes
Efficient use of public resources is clearly a relevant issue to be studied from several points of view. Among others, it accounts for a significant share of the total economy activity and it deals with non market oriented activities. In Spain, the regional level is particularly relevant due to the progressive decentralization during the 200s of key public policies constituting the welfare state (as education, health, etc.). Consequently,it increased notably their financing needs but affecting asymmetrically because of the important differences in their fiscal capacity. Moreover, they mostly share (15 of 17) a common financing system in which an efficient use of resources is assumed but not evaluated. Our results show that normally a few of the regions tend to be the top performers, but there no regions performing poorly in every aspect. It is also worth noting that no dramatic changes can be seen in terms both of expenditure and performance during the recent Great Recession.
In 1986, the Filipino people made history by overthrowing the 13-year Marcos dictatorship through a peaceful people power revolution. As a result, the country restored democracy and free elections through the 1987 Constitution which promised to empower citizens and Local Government Units (LGUs). Decentralization and local autonomy were further enhanced to put greater freedom and autonomous powers to local governments. However, it was the shortcomings of decentralization that paved the way for the interest of conversion to federalism. Thus, the present administration of the Philippine government has planned to convert the country's political system from democratic to federal. The study employed descriptive research design. The 58 local government officials in SAMARICA area were purposively selected. It includes the municipality of San Jose, Magsaysay, Rizal, and Calintaan in the province of Occidental Mindoro. The instrument underwent validity procedures and in the reliability test, it was found reliable. Result shows that the local government officials are middle-aged, male, and college graduate. In addition, they are the only politician in the family, members of the Liberal party, and councilors serving in the third class municipalities with short political experience. Lastly, officials have been attending seminars and trainings in the national level with few membership in organizations. The officials are "moderately perceptive" about the issues surrounding the proposed federal system of government. There is a significant difference in the respondents' perspectives when they are grouped based on age, the class of municipality, position, and attended seminars and trainings.
The paper is devoted to the issue of centralization in public finance in Russia, and highlights one of the problems of interpretation of the Russian Constitution clauses. The Rulings of the Russian Federation Constitutional Court from the period 1997–2006 created legal grounds for the process of centralization and reduction of the regional powers regarding budgeting and taxation. But all arguments of the Court are debatable. Wherein, the centralization is justified by the constitutional principle of uniform economic area. The author argues that the Russian Constitution does not have clauses establishing the uniform budget and tax systems directly, and any model of intergovernmental relations might comply with the Russian Constitution. Uniformity of economic area does not imply uniformity in taxation and budgeting in the sense of sameness. Study of foreign practices shows different approaches to the understanding of uniformity in economy, and in taxation and budgeting. The contemporary Russian public finance law is formed under the influence of the Constitutional Court’s legal positions, and the process of centralization is still evolving. The Russian history of intergovernmental relations (1991–1997) shows another model of fiscal federalism – the decentralized federalism. Replacement of the fiscal federalism models is determined by the political considerations, not by constitutional requirements.
Cities across sub-Saharan Africa are faced with challenges in urban planning and service delivery due to insufficient capital for long-term investment projects. Despite the success of municipal bonds as a tool to assist in closing this financing gap in much of the rest of the world, there have been limited examples of success in this region. This study looks at the universal obstacles limiting sub-national governments from using municipal bonds as a financial instrument before examining four case studies - Johannesburg, Douala, Dakar and Kampala - to better understand their approaches to municipal bond issuance. Based on the findings from research, the thesis concludes that the chief obstacle blocking the uptake of municipal bond issuance as a means for raising funds stems from a variety of elements in the constitutional and regulatory systems in each country. This represents a significant departure from the commonly-held understandings that cities in the region are not eligible for long-term debt and are ill-managed, lack capacity, or are not viewed as creditworthy by institutional investors and other purchasers of municipal bonds. The success of municipal bond issuance appears to be contingent on strong interlinkages between central and subnational governments. This dissertation offers a critical review of the explicit and implicit powers granted to local governments under the constitutions of each of the countries, specifically the legislation that enables or prohibits municipalities from issuing bonds. Reform to the existing regulatory and legal environments across the African continent, ones that govern a financially-sustainable level of indebtedness for sub-sovereign governments, is an essential step in ensuring the future growth of Africa’s cities.
We analyze the strategic interaction of regional and federal governments using a model that includes fiscal externalities in the form of inter-regional capital tax competition and technical externalities in the form of inter-regional spillovers. The federal government aims to correct for these inefficiencies using a transfer system. If the regional governments are policy leaders (such that federal policy is set conditional on regional choices), they will internalize both fiscal and technical externalities but free-ride on the transfer system. Efficiency can be achieved by introducing a second transfer scheme that is independent of regional public production. If the federal government sets its policy first and can commit itself to it, the outcome is efficient only if matching grants are used that are financed outside of the transfer system.