Abstract The process of decentralisation of public administration was based on the transfer of competences from state administration to municipalities and on the setting of new conditions for financing of municipalities. In the process of decentralization of public administration and fiscal decentralization, the range of original and transferred competences, as well as the tasks of municipalities and the corresponding instruments of financing, were set there by mutual agreement between the state bodies and the local self-government. The transfer of competences on municipalities in the field of education was not a simple process. The first steps in the management of schools and educational facilities did not entail without problems. Many of the misunderstandings grew up mainly from a lack of knowledge of the relevant laws governing the specific educational and training activities, operation, financing, personnel and material-technical provision of schools and educational facilities. The aim of the contribution is legislative and financial definition of current system of provision of services by municipalities in the Slovak Republic in the field of regional education, because this area is complicated and disorganized the laws dealing with education and its financing have undergone many amendments. The following compact and comprehensive issues can serve as a framework for further research.
The general purpose of this study is to thoroughly examine decentralization in education according to the literature and previous research, and to discuss the applicability of educational decentralization practices in Turkey. The literature was reviewed for the study and findings reported. It has been observed that decentralization in education practices were realized in many countries after the 1980’s. It is obvious that the educational system in Turkey has difficulty in meeting the needs, and encounters many problems due to its present centralist state. Educational decentralization can provide effective solutions for stakeholder engagement, educational financing and for problems in decision making and operation within the education system. However, the present state of local governments, the legal framework, geographical, cultural and social features indicate that Turkey’s conditions are not ready for decentralization in education. A decentralization model realized in the long run according to Turkey’s conditions, and as a result of a social consensus, can help resolve the problems of the Turkish education system.
The purpose of this article is to compare systems of fiscal decentralization in EU member states according to selected quantitative criteria. The results indicate that a higher number of lower levels of government usually indicate a greater share of local finance; however, this finding does not confirm the inverse link. Although the structure of expenditures is similar, the shares of funds for the implementation of individual tasks differ significantly. On average, the countries allocate most funds to education, social security, healthcare, and administration, with only a quarter of the countries recording the same or higher amounts of revenues than expenditures. Most countries still cover the existing deficit through transfers from the central government, equalization schemes, or borrowed funds.
Dubravka Jurlina Alibegović, Sunčana Slijepčević, Željka Kordej-De Villa
Decentralization can be generally described as a process in which selected functions are assigned to sub-national units. The literature identifies number of positive consequences of decentralization which all lead to better satisfaction of citizens? needs for public services. Although decentralization process in Croatia started more than 10 years ago, it still has not been finished. It led to new division of authorities and responsibilities to the local government units, but the level of fiscal decentralization remained lower than in the EU countries. The efficient decentralization should incorporate delegation of authorities, responsibilities and resources to local government units based on the clear criteria, but also should ensure better coordination and cooperation of all entities in providing public functions. In the paper we analyze fiscal capacity of local government units to provide an insight into the main problems of decentralization in Croatia. We show that the most of local government units have very low fiscal capacity and cannot finance basic public functions from their own resources. The paper also presents result of the performed survey about decentralization process among local councilors at the regional level in Croatia. We explore how local councilors at regional level in Croatia evaluate different goals of decentralization. Having in mind the lack of fiscal capacity, we identify two possible solutions for an optimal provision of public functions. The first one is level of political will for the joint provision of public functions between different local units, and the second one is change in territorial division of the country. We measure the difference in the attitudes toward these questions across counties.
<p class="Abstract1">The regional autonomy in Indonesia gives the implication to the shift of authority between the center and local government in many sectors. The regional autonomy also makes the decentralization that related with the local financing management, the economy planning including the local planning and other planning that shifted from the central government to the local government. The study aims to know the effect of fiscal decentralization from the income and spending aspect towards the local economic development in Indonesia (gas and oil nationally). The method analysis in this study is the panel data from 1995-2000 and 2001-2004.The result shows that before decentralization on the year of 1995-2000, the fiscal decentralization whether from income or spending aspect has negative influence to the economy growth. Coming into decentralization from 2001-2004, the fiscal decentralization on supporting the economy development, whether from government income or spending is increasing. But the fiscal decentralization is exceeding the spending aspect compare to the income, whether in national level, with oil and gas or without oil and gas, inside Java or outside Java. <p class="Keyword1"> <p class="Abstract2"><strong></strong>Pelaksanaan otonomi daerah di Indonesia membawa implikasi pada pelimpahan kewenangan antara pusat dan daerah dalam berbagai bidang. Adanya otonomi daerah maka terjadi desentralisasi yang menyangkut pengelolaan keuangan daerah, perencanaan ekonomi termasuk menyusun program-program pembangunan daerah dan perencanaan lainnya yang dilimpahkan dari pusat ke daerah. Studi ini bertujuan untuk mengetahui pengaruh desentralisasi fiskal dari sisi penerimaan dan pengeluaran terhadap pertumbuhan ekonomi daerah provinsi di Indonesia (nasional dengan migas dan tanpa migas, di Jawa dan di luar Jawa). Metode analisis yang digunakan dalam penulisan studi ini menggunakan data panel secara terpisah pada periode 1995-2000 dan 2001-2004. Hasil analisa menunjukkan bahwa sebelum pelaksanaan era desentralisasi periode 1995-2000, pengaruh desentralisasi fiskal dari sisi penerimaan dan pengeluaran berpengaruh negatif terhadap pertumbuhan ekonomi, baik untuk tingkat nasional dengan migas dan tanpa migas, di Jawa dan di luar Jawa. Memasuki era desentralisasi selama kurun waktu 2001-2004, pengaruh desentralisasi fiskal dalam mendorong pertumbuhan ekonomi, baik melalui sisi penerimaan maupun pengeluaran mengalami peningkatan dibandingkan sebelum era desentralisasi. Namun pengaruh desentralisasi fiskal tersebut jauh lebih besar melalui sisi pengeluaran dibandingkan sisi penerimaan daerah, baik di tingkat nasional dengan migas dan tanpa migas, di jawa maupun di luar Jawa. <p class="Keyword1">
Hava Mucolları, Alba Dumi, Zaim Korsı, Elisabeta Duçellari
This paper includes partnerships with community-based organizations, public and private colleges, universities, public school teachers, public health departments. Additionally, more number of community leaders have been trained to deliver educational workshops; PSI has developed a robust workshop leader database, which permits remote access to (and entry of) service delivery information. This will be an important point of administrative changes in Albanian public policies as an obstacle to the operating foreign investments, comparison of EU. Entrepreneurship ambition has worked to support changes in Albanian law that would offer anti-discrimination protections in keeping with international standards. Another point of administrative changes in Albanian public policies as an obstacle to the operating foreign investments, comparison of EU is: (1) International investments contributed to the improvement of Albania’s financial regulatory environment which has strengthened public confidence in the banking system and has provided a more secure, efficient and transparent financial system to meet the credit, savings and insurance needs of businesses and individuals. The paper provides support for legislative initiatives and local government activities that advance the decentralization process and increase the control of local government by local constituents, thus decreasing the control of central authorities. DOI: 10.5901/mjss.2013.v4n10p34
Based on the Chinese provincial panel data from 1995 to 2008, using the panel co-integration method, this paper presents an empirical study on the long-term equilibrium relationship between the fiscal decentralization, the local government competition and the farmland conversion. On this basis, establishing the dynamic panel data model, using the generalized method of moments (GMM) to analyze the dynamic impact of the fiscal decentralization and the local government competition on the farmland conversion from the view of three cross-regional groups and the mainland China. The results show that there is a long-run co-integration relationship between the fiscal decentralization, the farmland conversion and the local government competition, and also there is a positive significant influence of the fiscal decentralization and the local government competition on the farmland conversion, a 1% increase in the degree of fiscal decentralization will increase the area of farmland conversion by 0.3280%. In addition, there is a significant difference of the incentive effect of local government competition on the farmland conversion in different regions. The paper ends with policy suggestions for perfecting the system of the fiscal decentralization, taxation and the division of responsibility and authority, reforming the criterion of the political achievement assessment, strengthening the management of land revenue, reducing the reliance of the local government on land finance; at the same time, the farmers' land property rights should be perfected.
The purpose of an article is to compare systems of fiscal decentralization in EU member states according to selected quantitative criteria and European Charter of Local Self-Government principles. The results show that a higher number of lower levels of government usually indicate a greater share of local finance within the total public finance, however, this finding does not confirm the inverse link. Even though the structure of expenditures in EU countries is similar, the shares of funds for the implementation of individual tasks differ significantly. On average, the countries allocate most funds to education, social security, healthcare, administration and political systems, with only a quarter of the countries recording the same or higher amounts of revenues than expenditures. Most of the countries still cover the existing deficit either through transfers from the central to lower levels of government or through equalization schemes or borrowing, which otherwise represents a departure from one of the basic principles of the Charter, which stipulates that financial resources must be commensurate with the responsibilities of local self-government.
This paper critically accounts for why fiscal decentralization does not necessarily enhance revenue autonomy in the experience of Taiwan, as local governments do not pursue it. This experience is especially relevant to unitary countries that are undergoing both democratization and fiscal decentralization. This paper shows that, with inter‐jurisdictional competition, democratically elected local governments are inclined to pursue tax harmonization and have little incentive to maximize taxing powers even though doing so increases own‐source revenues. The local governments in Taiwan take a ‘mini‐max’ fiscal strategy, which involves minimizing changes to own‐source revenues while maximizing local expenditures. To finance increasing expenditures as a response to the demands of constituencies, local governments tend to press the central government to increase local government's tax bases, and to try to gain a greater share of intergovernmental transfers by having their administrative status upgraded. In summary, revenue autonomy is not being pursued by local governments because of political considerations. In a decentralized fiscal system, local governments can be fiscally accountable, but still irresponsible .
The present work aims to study the public finances and the economic behavior of Municipalities alagoanos between the years 1999/2010, using the fiscal and economic indicators commonly used. Therefore, it is considered the theoretical training of Public Finance, the influence of government in the economy to theoretical assumptions about the process of decentralization / centralization in Brazil. The Constitution of 1988 is a milestone in the pursuit of decentralized fiscal federalism, since from that moment, the municipalities now receive the status of a federated entity and had the largest increase in revenues and collection mechanisms itself. Thus, subnational, closer to the wishes of the population could more effectively meet the state's role in the production of public goods and the solution of the demands of the population. However, in the years after the Constitution of 1988, the political changes in the country, especially with Brazil's adherence to the neoliberal project, the advent of the plan and the actual enactment of the Fiscal Responsibility Law, led to a new process of fiscal centralization in Brazil, with consequences for the 5565 Brazilian municipalities. In this context, it is statistically analyzed the finances and economy of the municipalities in Alagoas. The GDP of them indicate the growth of the service sector and centralization of wealth in a small number of cities, as well as the lack of dynamics in small towns, which the government has the primary component in your product. The analysis of municipal finances, with the support of development indicators and the index itself FIRJAN fiscal management, confirm the initial assumptions of the work: the low collection itself, high dependence on federal transfers, effort and compliance with the limits established by LRF for personnel expenses and low levels of investment. Thus, the main findings indicate that the decentralization process of the 1988 Constitution was undermined by the next decade, penalizing the poorest municipalities in case of most in Alagoas.
This paper models the local tax mix determination process in the presence of statewide fiscal limitations—the decentralized government finance archetype—and shows how excess sensitivity of local public spending to grants (the conventionally and somewhat misleadingly termed “flypaper effect”) arises in the constrained tax mix irrespective of whether lower or upper limits bind and how it cannot, in general, be taken as a symptom of local government overspending. An empirical application to Italian province panel data provides consistent evidence of the role of corner solutions produced by two-sided tax limits in explaining the sensitivity of local public expenditures to grants.
Local government is the tier of public authority that citizens first look to solve their immediate social problems. Among all the public institutions at local level, council has a special status and authority as local elected bodies. They are uniquely placed to provide vision and leadership to their local communities. They are able to make things happen on the ground where it really matters. The government of Ethiopia in general and Addis Ababa city administration in particular establishes council at different tiers of government as parliamentary control mechanism to ensure effective policy implementation, promote local democracy and improve service delivery. However, woreda councils in Addis Ababa city administration were not seen playing such role of democracy promotion. Moreover, studies conducted in regional woredas divulged that Woredas council have not yet managed to exercise sufficient local autonomy due to several reasons such as absence of clearly established legal mandate, lack of devolution of power, poor organization of the system and tight control and intervention by higher authorities. Therefore, this study aimed to assess the challenges and prospects that woreda council at Addis Ababa city administration has faced in promoting democracy among grass-root people. It also examines the overall operations of the councils from the viewpoints of democratic government and decentralization In order to pursue the objective of the study the researcher use multi-stage sampling technique and relied on both primary and secondary data source. Primary data collected through questionnaires, interview and observations while secondary data obtained from document analysis like legislation on the issue, minutes and reports complied by counsel's office. It was found that problems prevailed in regional woreda councils are also impeded woreda councils at Addis Ababa City Administration. The internal working system of woreda councils reflected that executive domination is very soaring, and councils are not responsive to the needs of the community and most importantly democratic essence viz. accountability, transparency, participation and autonomy are not adhered principles in the councils conduct. Therefore, councils as they are impeded by the above-mentioned challenges are playing insignificant role in cultivating democratic value and improving the service delivery to the grass root people. Therefore, it is recommended that the internal working system of councils need to be very transparent, responsive, participatory and free from any unnecessary intervention. Councilors must be sensitive to public interest; legal back up from the city administration is also needed in order to make councils strong, autonomous and powerful. The field that councilors operating also should be open to all stakeholders as the democracy promotion works calls for the involvements of different actors
This study is the first attempt to examine the determinants of expenditure decentralization at sub-provincial levels in China. The Chinese central government gives detailed guidelines to local governments on public finance, but, ironically, their expenditure assignment is far from being well-regulated. Differences in fiscal decentralization on the expenditure side are enormous among local governments. Employing a panel dataset of 1995–2006, we provide empirical evidence that transfer dependency negatively affects expenditure decentralization in Chinese local governments. It suggests that intermediate governments, i.e., provincial governments, may have “grabbed” central grants for self-interests.
Gover Barja Daza, Sergio Villarroel Böhrt, David Zavaleta Castellón
The second generation fiscal federalism (sGff) approach is used as a reference to analyze the political and fiscal institutional design of Bolivia’s decentralization model and its evolution. subnational public finance data up to 2008 is used to verify that decentralization of expenditure was higher than that of revenue, establishing a context of vertical fiscal imbalance that increased due to growing fiscal transfers during the positive external shock (boom) period. consequently, the subnational fiscal surplus was not a result of internal efficiency but of excess revenues from such transfers. Panel models were estimated to identify and assess the implicit incentives embedded in fiscal institutions of the decentralization model. findings at the municipal level are: i) misalignment of local spending with local interests due to dominance of transfers over own revenue (dominance of central government development policies); ii) incentive to spend transfers faster than own revenue (flypaper effect); iii) greater marginal contribution of own revenue to positive fiscal balances compared to transfers, thus introducing the seed for a soft budget constraint but hidden by the fiscal surplus; iv) disincentive to generate own revenue (tax and non-tax) due to the size and growth of transfers (disincentive to the culture of contributing to own revenue). findings at the prefecturall level are: i) misalignment with regional interests given the dominance of transfers over own revenue due to absolute lack of tax powers (until 2009); ii) high tendency to a soft budget constraint and, eventually, also fiscal bail-out, hidden by the fiscal surplus; iii) in only two departments collection of national-level taxes were higher, compared to transfers received in the same departments; iv) disincentive to pay the VAt (national-level tax) due to higher royalty transfers received, an effect not extended to other national-level taxes; v) high dependence from hydrocarbon-based transfers, and fiscal risk when this natural resource declines (both in volume and prices) due to volatility of international oil prices. Also, as a result of the decentralization model a positive and significant impact was found on education-coverage indicators, an important development objective of the national government.
Abstract In the last three decades, China has experienced dual decentralization in transforming its economy, resulting in decentralization and deconcentration in public administration and social service delivery. Under the policy framework of decentralization, particularly when welfare financing has been decentralized to local governments, the emergence of welfare regionalism is evident in China. This paper sets out against this policy context to examine how three local governments in eastern coastal areas in China handle changing labour welfare needs by institutionalizing social and labour protection measures to meet the local needs instead of implementing central policy. With particular reference to examine why regional variations exist in welfare provision even though the socio-economic development status is similar in these areas, this paper shows how different forms of capitals, government's governance style and diversity of industries have affected welfare arrangements for labour in China.
이 연구는 지방분권을 위한 정책수단으로 재정분권이 어떠한 방식으로 이해될 수 있으며, 왜 필요한지에 대해 시스템사고의 이론을 바탕으로 지방재정시스템을 구성하는 변수들의 상호작용관계를 분석하였다. 연구를 통해 얻어진 결과는 다음과 같다. 첫째, 지방재정시스템을 구성하는 변수들은 상당한 수준에서상호작용관계가 형성되고 있으며, 5개의 양(+)의 피드백 루프가 중심이 되어 급속한 성장과 급속한 쇠퇴를 거듭한다는 점을 발견할 수 있었다. 둘째, 지방재정분권화의 타당성에 대한 전략 지점이 인과지도 모델링을 통해 발견되었다. 특히, 선순환구조를 악순환의 구조를 변질시키는 변수(국고보조금, 부동산거래과세, 중앙정부차원의 지방재정조정제도, 지방정부채무 등)이 지속적으로 작동함으로써 지방재정시스템을 쇠퇴시키는 것으로 나타났으며, 이를 바탕으로 전략적 정책과제가 도출 될 수 있었다. 이러한 연구는 지방재정분권에 대해 부분에 지식이 아닌 전체적 지식의 관점에서 지방재정시스템을 이해하고 지방재정의 학문적 폭을 높여 줄 것으로 판단된다. This study analyzes the interaction of variables consisting of the local finance system based on the theory of system thinking regarding how financial decentralization can be understood as the political means for local decentralization and why it is needed. The results gained from this research are as follows: first, variables consisting of the local finance system form interactional relationship in the significant level, and it has been found that rapid growth and rapid decline repeat with five positive feedback loops as the center. Second, strategic points for the validity of local finance decentralization were discovered through causal map modeling. In particular, it has been shown that the virtuous cycle structure declines the local finance system through the constant operation of variables (government subsidies, taxation for real estate transactions, central government's local finance mediation system, and local government debt, etc.) that deteriorate the vicious cycle structure. Based on this, strategic policy tasks were drawn. It is expected that this study will help the understanding of the local finance system and increase academic width for local finance from the aspects of general knowledge, not the knowledge about local finance decentralization.
The objective of this study is explore \n in depth public finance issues and their impact on \n decentralized service delivery at the regional and woreda \n level in Amhara region. The study is carried out as part of \n the federal and some regional case studies designed to \n examine effectiveness of public finances of sub-national \n governments. This study was expected to (i) review the \n institutional arrangement for managing public finances at \n the regional level including policies, budgetary \n institutions, systems and processes; (ii) assess the level, \n trend, and composition of public spending (both functional \n and economic classification) in per capita terms over the \n past five years and identify key achievements and \n limitations; (iii) assess the level, trend, and, composition \n of revenue at the regional level and examine the financing \n framework, including ways to increase local revenue \n generation capacity; (iv) assess the role of external aid in \n supporting decentralized service delivery and the \n sustainability of the program in absence of external aid; \n (v) review the planning and budgeting process as well as the \n quality of PFM system; and (vi) data permitting, establish \n the link between the level of spending and the outputs and \n outcomes for selected sectors. The study used standard \n public financial process review methodologies used for \n undertaking PEFA assessments. The report reviewed the \n various studies, plans and performance reports of the \n various sectors in the regions between EFY 1997 and 2001. In \n addition, key informant interviews were carried out at \n bureaus levels and woreda offices of education, health, \n water, agriculture and rural development, finance and \n economic development, revenue, General Auditor, rural road \n and woreda administrations.
In the discourse of local government law, the idea that a mobile populace can “vote with its feet” has long served as a justification for devolution and decentralization. Tracing to Charles Tiebout’s seminal work in public finance, the legal-structural prescription that follows is that a diversity of independent and empowered local governments can best satisfy the varied preferences of residents metaphorically shopping for bundles of public services, regulatory environment, and tax burden. This localist paradigm generally presumes that fragmented governments are competing for residents within a given metropolitan area. Contemporary patterns of mobility, however, call into question this foundational assumption. People today move between — and not just within — metropolitan regions, domestically and even internationally. This is particularly so for a subset of residents — high human-capital knowledge workers and the so-called “creative class” — that is prominently coveted in this interregional competition. These modern mobile residents tend to evaluate the policy bundles that drive their locational decisions on a regional scale, weighing the comparative merits of metropolitan areas against each other. And local governments are increasingly recognizing that they need to work together at a regional scale to compete for these residents.This Article argues that this intermetropolitan mobility provides a novel justification for regionalism that counterbalances the strong localist tendency of the traditional Tieboutian view of local governance. Contrary to the predominant assumption in the legal literature, competition for mobile residents is as much an argument for regionalism as it has been for devolution and decentralization. In an era of global cities vying for talent, the mobility case for regionalism has significant doctrinal consequences for debates in local government law and public finance, including the scope of local authority, the nature of regional equity, and the structure of metropolitan collaboration.
With decentralization and urbanization, the debts of state and local governments and of quasi-public agencies have grown in importance. Rapid urbanization in developing countries requires large-scale infrastructure financing to help absorb influxes of rural populations. Borrowing enables state and local governments to capture the benefits of major capital investments immediately and to finance infrastructure more equitably across multiple generations of service users. \n \nWith debt comes the risk of insolvency. Subnational debt crises have reoccurred in both developed and developing countries. Restructuring debt and ensuring its sustainability confront moral hazard and fiscal incentives in a multilevel government system; individual subnational governments might free-ride common resources, and public officials at all levels might shift the cost of excessive borrowing to future generations. \n \nThis book brings together the reform experiences of emerging economies and developed countries. Written by leading practitioners and experts in public finance in the context of multilevel government systems, the book examines the interaction of markets, regulators, subnational borrowers, creditors, national governments, taxpayers, ex-ante rules, and ex-post insolvency systems in the quest for subnational fiscal discipline. \n \nSuch a quest is intertwined with a country’s historical, political, and economic context. The formal legal framework interacts with political reality to influence the dynamics of and incentives for reform. Often, the resolution of a subnational debt crisis unfolds in the context of macroeconomic stabilization and structural reforms. \n \nThe book includes reforms that have not been covered by previous literature, such as those of China, Colombia, France, Hungary, Mexico, and South Africa. The book also presents a comprehensive review of how the United States developed its debt market for state and local local governments through a series of reforms that are path \ndependent, including the reforms and lessons learned following state defaults in the \n1840s and the debates that shaped the enactment of Chapter 9 of the Bankruptcy \nCode in 1937. Looking forward, pressures on subnational finance are likely to continue—from the fragility of global recovery, the potentially higher cost of capital, refinancing risks, \nand sovereign risks. This book is essential reading for anyone wanting to know the \nchallenges and reform options in debt restructuring, insolvency frameworks, and \npublic debt market development.
The objective of this study was to explore the impact of decentralization of central government functions to local authorities in Tanzania. The study involved a sample population of 50 people and data were collected from primary and secondary source of data. The objective of this research was to explore the impact of decentralization of Central Government functions to Local authorities in Tanzania. There are four Specific Objectives to this study. This study used the descriptive type of research and the findings addressed the research questions. The study came with the following findings; the decentralized functions have good impact on decision-making through structured meetings, people are involved in planning and budgeting process by 75%. Resources such as finance and manpower are managed by people at grass root and revenue collection is done by the local authorities. The study concludes that the decentralized functions have impacts on autonomy of local authorities, increased control of financial and human capital by local authorities hence increase of performance, transparency and good governance in local authorities. The study came with recommendations for improvements as follows; the capacity building should be strengthened to extension officers and local leaders. Local leaders should identify their roles and obligations. Also they should provide full autonomy and authority without interference to local authorities in areas of plans and budgets. The central government should leave some revenue sources to local authorities which are collected by central government. There should be non-interference of central government in decision-making to local authorities by District Commissioners’ office and Regional Secretariat. There should be harmony between councillors and management to avoid unnecessary conflicts.
This paper studies the political economy of pricing and investment for excludable and congestible public goods in a federal state. Currently, we observe a wide variety of practices, ranging from federal gasoline taxes and road investment to the local supply of -- and sometimes free access to -- libraries, parking spaces and public swimming pools. The two-region model we develop allows for spill-overs between regions, it takes into account congestion, and it captures both heterogeneity between and within regions. Regional decisions are taken by majority voting; decisions at the federal level are taken either according to the principle of a minimum winning coalition or through cooperative bargaining. We have the following results. First, when users form the majority in at least one region, decentralized decision making performs certainly better than centralized decision making if spill-overs are not too large. Centralized decisions may yield higher welfare than decentralization only if users have a large majority and the infrastructure in a given region is intensively used by both local and outside users. Second, if non-users form a majority in both regions, centralized and decentralized decision making yield the same socially undesirable outcome, with prices that are much too high. Third, both bargaining and imposing uniform price restrictions across regions improve the performance of centralized decisions. Fourth, the performance of decentralized supply is strongly enhanced by local self-financing rules; it prevents potential exploitation of users within regions. Self-financing rules at the central level are not necessarily welfare-improving. Finally, the results of this paper contribute to a better understanding of actual policy-making.
This article reflects some results of the work undertaken by the expert working group on optimization of public expenditures in the area of governance which contributed to the overall efforts on evaluating efficiency of the federal budget expenditures and forming recommendations on the optimization of such expenditures in 2013. This evaluation was conducted jointly by the Russian Academy for National Economy and Public Administration (RANEPA) and National Research University – Higher School of Economics (NRU-HSE) in cooperation with the Ministry of Finance, Ministry of Economic Development, and other federal authorities. The article is focused on the influence of decentralization policies on the efficiency and effectiveness of public spending both in a broad context and in one, based on the practice of delegating some federal powers to the constituent entities (regions) of the Russian Federation. Analysis of the federal budget execution data as well as some public sectors’ statistics demonstrates that the practice of delegation of the Russian Federation’s powers to the sub-national level which was accompanied by relevant budgetary transfers (subventions) has led to an excessive growth of the federal budget expenditure on the relevant areas (as compared to the GDP growth for the same period and the growth of the federal budget expenditures on the public administration as a whole). At the same time –at least in the selected cases –the efficiency and effectiveness of public spending, including performance outputs have decreased aft er the delegation of powers took place. Decentralization based on the delegation of powers has also resulted in new functions aimed at controlling the effectiveness of the delegated authorities’ performance. As a result, total administrative costs have increased. Given these conclusions it is recommended to switch from the practice of delegating authority to the practice of reallocating certain powers among the levels of government with a parallel reallocation of the budget revenue sources. Such a reallocation should be based on a detailed profound review of the efficiency and effectiveness of decentralization in each particularsector, with both the options of further devolution and recentralization being considered.
This paper shows that the inefficiency of fiscal decentralization in the presence of spillovers, a main tenet of the decentralization literature, is overturned in a particular transportation context. In a monocentric city where road (bridge) capacity is financed by budget-balancing user fees, decentralized capacity choices (made by individual zones within the city) generate the social optimum despite the presence of spillovers. This conclusion is closely tied to the famous self-financing theorem of transporation economics.