This paper investigates the socioeconomic impact of fiscal decentralization in Pakistan. The time-series sample during 1982-2018 is divided between pre and post-periods of the 7th National Finance Commission (NFC) Award of 2009. The socioeconomic impacts were separated into growth, education, and health. Results found that there is a positive long-run relationship across the variables. At the same time, the total effect from composite decentralization has positively impacted economic growth and education but none to the health sector after the 7th NFC award. The outcomes have been elaborated with socioeconomic analysis. The study also provides policy recommendations based on empirical outcomes.
Local government is one of the most important pillars of good governance of a society, an important indicator to express the essential role it has in the sustainable development (SD) of a country. The reforms undertaken in Albania in terms of increasing the fiscal and functional capacity of local government, connect it more and more with all components of SD. The use and maximization of the capacities of the local government in order to improve the basic goals of SD, is supported not only by the theoretical connection of functions but also by the experience of developed countries with a deep decentralization. In Albania, the local government receives revenues in the form of central government transfers and its own. These revenues are used by the local government to finance public services that have a direct impact on the lives of citizens but also to improve the quality of life. Both forms of local government revenue are at full discretion to be used by local selfgovernment units and to improve measurable indicators of increasing the quality of public services and financing sustainable development.
Cenay Babaoğlu, Lucie Sobotková, Martin Sobotka, Murat Altuğ Köktaş · 5 authors
Abstract The article deals with the issue of fiscal decentralization in relation to compliance with fiscal discipline at the municipal level. The article evaluates the situation of selected Czech and Turkish cities. In the case of Czech cities, so-called statutory cities were selected, which, due to their size and budget, have a certain independence from the central government. In the case of Turkish cities, the largest ones were analyzed, which also have a high degree of autonomy due to their size. The unifying element of both samples is approximately similar financing conditions. In both cases, shared taxes are used, but they are in the hands of the central government, and the municipalities have no possibility to influence them. In the case of municipalities, they can receive subsidies from the central government. From the perspective of fiscal responsibility management, relations with the central government appear to be a stabilizing element. However, at the same time, strengthening revenues associated with local government could also support fiscal discipline. In particular, this possibility would be significant in the case of smaller municipalities when the share of local income in total income is increasing. Another option for discussion is the availability of debt financial instruments. In the case of Turkish cities, fiscal discipline is significantly correlated with external debt. Although Czech municipalities can easily access debt financial instruments, they cannot use foreign financing. JEL Classification: C33, C35, H71, H72, H77
Abstract The article analyzes the specifics of the COVID-19 crisis and its impact on the public finance system, taking into account the key problems of the theory of fiscal federalism. The purpose of this article is to examine the impact of the pandemic crisis on the fiscal relations taking place between different levels of public authority ( intergovernmental relations – IGR ), considered in the context of the decentralization of the public finance system and the associated distribution of public functions and resources. The article refers to the model features of these relationships, as defined in the theory of fiscal federalism. It also examined the responses of European countries to the negative effects of the COVID-19 crisis, taken within the framework of the IGR, in order to limit the negative effects of the pandemic at different stages. An attempt was also made to answer the question of how the current pandemic crisis may change the multilevel governance (MLG) patterns set forth in the doctrine. The Polish public finance system was used as an example for detailed analysis in this regard.
Financing regional government involves trade-offs between own-source taxes and grants. Improved accountability has been an argument behind calls for greater tax devolution, but this argument relies upon effective scrutiny mechanisms existing or being developed. This paper explores such issues through the lens of recent tax devolution to Scotland. Drawing on insights from senior stakeholders, we assess how scrutiny has changed in the aftermath of new powers. We conclude that, despite some improvements, progress has been limited. We develop an analytical framework to understand why, drawing out lessons for improving accountability with fiscal decentralization.
The purpose of our paper is to analyze the main factors which influence fiscal balance’s evolution and thereby identify solutions for configuring a sustainable fiscal policy. We have selected as independent variables some of the main macroeconomic measures, respectively public debt, unemployment rate, economy openness degree, population, consumer goods’ price index, current account balance, direct foreign investments and economic growth rate. Our research method uses two econometric models applied on a sample of 22 countries, respectively 14 developed and 8 emergent. The first model is a multiple regression and studies the connection between the fiscal balance and selected independent variables, whereas the second one uses first order differences and introduces economic freedom as a dummy variable to catch the dynamic influences of selected measures upon fiscal result. The time interval considered was 1999-2013. The results generated using the two models revealed that public debt, current account balance and economic growth significantly influence the fiscal balance. As a consequence, the governments need to plan and implement a fiscal policy which resonates with economy priorities and the phase of the economic cycle, as well as ensure a proper management of the public debt, stimulate sustainable economic growth and employment.
Intergovernmental fiscal and finance relations have a deep impact on characteristics of China's economy and the behavior of local government at all levels. This paper wants to figure out the basic logic for the allocation of financial resources among regions under the implicit financial decentralization. Based on local government financing vehicles' (LGFV) debt data and by exploiting “Province Managing County” (PMC) reform as a policy shock to construct a DID framework, this study find that city governments with better economic and fiscal status can gain more funds through bank loans and municipal bonds when facing PMC reform, whereas the less developed ones are less capable to utilize the new opportunity, thus widening the regional gap of local government financing. Mechanism analysis implicates that city's economic and fiscal status are the deciding force of the above procedure. However, the catching-up pressures and developing incentives of less developed regions can't be realized in reality. This study argue that this might be an explanation for the expansion of regional disparity along with the reform of China's central-local relationship.
Andrew Aondohemba Chengе, Abel Ehizojie Oigbochie, Emem Udoh
Fiscal decentralization has become fashionable regardless of the levels of development and civilization of societies. Nations are turning to devolution to improve the performance of their public sectors. Fiscal federalism is concerned with the allocation of government resources, tax-raising powers, and spending powers to the various tiers of government. Despite the existing fiscal arrangement in the country, backed by the constitution, revenue deficits continue to impede government performance at all levels. The study aims to assess the impact of fiscal federalism on the structure of public spending in Nigeria. Friedman's theory of public expenditure was used as the theoretical underpinning of the study. The study adopted a mixed methodological approach to carry out the investigation. Documentary sources were used for data collection, while data analysis was done using descriptive statistics and content analysis. Findings of the study revealed that revenue yields had continued to dwindle in Nigeria at both national and sub-national levels between 2011 and 2021. The decline in government revenue yields was factored in by the fall in global oil prices and the lethargic nature of the non-oil sector. The study also established that the consequence of the feeble revenue base was that resultant government spending was directed more towards financing recurrent expenditure at the detriment of capital expenditure, thus crippling the drive to spur economic development. The study recommends that it is critical for the government to: Obliterate the present monolithic oil economy by emphasizing economic diversification to boost the financial base of the country and Prioritize public spending in favor of capital expenditure to propel economic growth and development.
<strong>Abstract:</strong> Local authority autonomy is critical for effective and efficient delivery of services to the people. One of the objectives of this study was to design a framework that seeks to address the challenges associated with attainment of local authority autonomy. The purpose of the framework was to support local authorities so that they participate in the implementation of development as per the needs of the people at the local level in Zambia. The study develops a framework for achieving decentralisation as an initiative for supporting public participation and local authority autonomy. The study establishes that local authorities in Zambia primarily financed through a system of intergovernmental transfers or grants, do not have adequate revenue base to guarantee fiscal autonomy and, are bogged down by limitless political interferences and regulations. In order to guarantee autonomy of local government, the study develops a framework through a pragmatic approach. Data is collected using purposive and critical case sampling, through person-to-person interviews, questionnaire interviews as well as secondary data through literature reviews and content analysis of local authority project documents. The sample size for the questionnaire was 103 computed at ninety-five percent confidence level with a five percent confidence interval. The framework was validated by 17 experts in the local government sector; that were involved in the implementation of both grant and locally financed projects. The study argues that the proposed framework could enhance decentralization and improve local authority autonomy in Zambia and the paper suggests that local government should intensify on internal revenue generation. <strong>Keywords:</strong> local government finance, local government framework, central government grants, fiscal autonomy, decentralization. <strong>Title:</strong> Achieving Fiscal Sustainability in Zambia’s Local Government: Designing a Local Government Framework <strong>Author:</strong> Moffat Tembo, Dr. Erastus Misheng’u Mwanaumo <strong>International Journal of Recent Research in Interdisciplinary Sciences (IJRRIS)</strong> <strong>ISSN 2350-1049</strong> <strong>Vol. 9, Issue 3, July 2022 - September 2022</strong> <strong>Page No: 33-46</strong> <strong>Paper Publications</strong> <strong>Website: www.paperpublications.org</strong> <strong>Published Date: 02-August-2022</strong> <strong>DOI: </strong><strong>https://doi.org/10.5281/zenodo.6952792</strong> <strong>Paper Download Link (Source)</strong> <strong>https://www.paperpublications.org/upload/book/Achieving%20Fiscal%20Sustainability-02082022-4.pdf</strong>
Existing literature has examined a plethora of factors that can affect the effectiveness, performance or nature of fiscal policy in an economy. In this paper we build on the fundamental tenets of micro-economic models to examine the potential ways cryptocurrencies can affect the effectiveness of a country’s fiscal policy. Our finding is that under the assumptions of an absence of uncertainties, perfectly competitive markets, household utility maximization, and usage of public money and cryptocurrency, the government purchases as well as the ability of the government to raise funds by issuing bonds and by taxation is decreasing in new investments in cryptocurrencies but increasing in the income earned from cryptocurrencies. We go further to discuss the factors that account for the sustained ability of cryptocurrencies to weaken the state’s fiscal-policy capabilities and possible ways the effects of cryptocurrencies on the state’s fiscal integrity can be mitigated.
Based on the scholar’s research on the influencing factors of local government debt, this paper argues that the local government financial resources, degree of decentralization and local government investment enthusiasm in local finance are the significant factors that influence the form of local government debt. This paper also chooses the panel data of China’s 31 provinces (cities) except Hong Kong, Macao and Taiwan from 2010 to 2019, to analyze the influencing factors of local government debt scale and the relationship of local government debt scale in different regions and demonstrates the correctness of the hypothesis proposed in this paper. The analyze result shows that the local government financial resources significantly inhibit the growth of local government debt. The degree of local decentralization is an essential factor to enlarge the scale of local government debt. There is a significant positive correlation between the enthusiasm of local government investment and the scale of local government debt.
This dissertation consists of two independent essays on public economics. The first essay studies the consequences of fiscal decentralization on poverty and income inequalities. This essay describes the possible channels through which fiscal decentralization might affect poverty and income inequalities, and carries out an empirical analysis with data of a large number of countries at different stages of development, for the period 1971-2000. Fiscal decentralization is found to have significant effects on poverty and income inequalities. These findings are important because they suggest, contrary to the traditional public finance theory, that sub-national governments can play an important role in the reduction of poverty and income inequalities. The second essay studies the second best solution to the public expenditures’ problem in the presence of a proportional labor income tax. By allowing the tax base to vary with the taxpayers’ behavioral responses to taxation, we derive the “effective” budget constraint faced by the government, which describes the set of affordable combinations of public and private goods. We show that the optimal solution to the government problem corresponds to the point of tangency between the effective budget constraint and the highest attainable social indifference curve. The traditional normative prescription for public expenditures under a second-best scenario does not satisfy this condition, and therefore it provides a suboptimal solution. Finally, we use the same analytical framework in order to explain the flypaper effect, an empirical regularity that has for long challenged the conventional theory.
Decentralization of infrastructure responsibility to subnational governments and the immense needs of infrastructure financing argue for expanding subnational borrowing responsibly. India, Indonesia, the People's Republic of China, and the Philippines embarked on developing their subnational debt market at differing paces and progresses. The transition to market-based financing is path dependent, requiring sequencing of reforms. Moral hazard is inherent in subnational borrowing for both borrowers and lenders. Subnational borrowing also intertwines with the intergovernmental fiscal system, which prescribes the division of spending, revenues, and deficit financing among tiers of government. Linking borrowing to debt-service revenues and allowing fiscal space for subnational government borrowing are paramount. The challenges facing subnational governments from COVID-19 are similar to those from other macroeconomic shocks. A long-term view is required as to the allocation of fiscal space between sovereign and subsovereign. Financial transparency is key as markets need to digest comprehensive information to appropriately price risks.
From a public finance point of view, achieving sustainable development hinges on two critical factors: the subnational implementation of public policies and the efficient allocation of resources across regions through vertical intergovernmental transfers. We introduce a framework that links these two mechanisms for analyzing the impact of reallocating federal transfers in the presence of regional heterogeneity from development indicators, budget sizes, expenditure returns, and long-term structural factors. Our study focuses on the case of Mexico and its 32 states. Using an agent-based computational model, we estimate the development gaps that will remain by the year 2030, and characterize their sensitivity to changes in the states’ budget sizes. Then, we estimate the optimal distribution of federal transfers to minimize these gaps. Crucially, these distributions depend on the specific development objectives set by the national government, and by various interdependencies between the heterogeneous qualities of the states. This work sheds new light on the complex problem of budgeting for the Sustainable Development Goals at the subnational level, and it is especially relevant for the study of fiscal decentralization from the expenditure point of view.
The study's main objective was assessing the practices and challenges of fiscal decentralization at Bedelle woreda, with particular reference to basic selected sectors (Education, Agriculture, Health, Water, and Road). According to the nature of this study, a descriptive research design with qualitative and quantitative methods was adopted. The population of the study was government employees working in selected sectors of Bedelle Woreda. The census sampling technique was used in this research because the study population was manageable. To this effect, 128 participants were selected using a census sampling size. Besides this, Woreda (District) Finance and Economic Development and Woreda Revenue Office Authority officials were purposely selected to conduct interviews. The data-gathering instruments were questionnaires, key informant interviews, and document analyses. Descriptive and inferential statistical techniques were used for data analysis. In descriptive using frequencies and percentages and inferential statistics, multiple linear regression was used to assess relationships between the independent variables (legal framework, revenue, expenditure, employee experience, employee training, management commitment, and fiscal transfers) and the dependent variable (fiscal decentralization). The findings show that internal revenue raising and utilization in the selected sectors was very low. Besides, lack of autonomy in expenditure decisions of sectors, insufficient capacity building, the extent of fiscal transfer, and financial resource were the major challenges in the study area. Overall, the regression analysis revealed that, Revenue raising (β = -0.164, p<0.05), Expenditure decision (β = 0.236, p<0.05), Employee experience (β = 0.525, p<0.05), and Commitment of management (β = 0.172, p<0.05), all have statistically significant and positive effect on fiscal decentralization. Based on the study's findings, it is recommended that existing legal frameworks be modified to enable the sectors to use their budget in line with their action plan to generate and utilize sufficient revenues. Special emphasis should be given to an employee's capacity building, independence of planning and budgeting, and clear autonomy of expenditure assignments. Inter-governmental fiscal relations should also be planned to reduce the horizontal imbalances observed at selected sectors of the woreda under study.
The unification of South Korea and North Korea is a plausible idea yet it requires a comprehensive preparation in advance. As a method to achieve fiscal efficiency in public services, decentralization theory1 is consistently applied. However, the current literature and political reality argue that decentralization does not always hold its efficiency. Therefore, this paper focuses on finding an ideal education finance model for post-unification Korea by studying how one country’s academic/economic status is related to their education finance model. This paper conducts the OLS linear regression analysis with 40 OECD and its partner countries’ information on GDP per capita, Gini Index, PISA mathematics score, and the form of education finance system. The main findings of this research are that the political and fiscal decentralization are different ideas, and fiscal decentralization does not always hold its efficiency as the decentralization theory states. Among the types of decentralization, the optimal education finance model for academic and economic improvement is deconcentration – which is a combination of fiscal centralization and political, or administrative, decentralization to empower regional autonomy.
Abstract Local governance in developing countries demonstrates many problems related to financial sources and good governance of their finances. Local Self-Government (LSG) units in the Republic of North Macedonia are very small which results in a lack of capabilities to raise enough funds to offer delegated services. The local government in the Republic of North Macedonia centralizes almost all public finance. Local budgets depend heavily on state transfers and donations from the central budget. The lack of funds remained a crucial problem even though there were some attempts for the decentralization process. Practically, governments in many of the local governments in North Macedonia could not secure their resources. In this way, they could come with specific charges, but all taxes are decided by the central government. The practice showed that local governments before borrowing needs to be approved by the Ministry of Finance. The Republic of North Macedonia as a potential candidate to join the European Union should make several changes regarding the legislation during the process of accession to benefit from being a small candidate country. The main aim of this paper is to investigate alternative financial sources such are Municipal Bonds, Partnership Sukuk securities, and PPP. Unfortunately, many financial alternatives have not been able to be implemented due to failures in reforms and good financial governance. But they remain an open opportunity for developing a local government in the future.
Abstract We examine the role of political alignment and the electoral business cycle on municipality revenues in Greece for the period 2003–2010. The misallocation of resources for political gain represents a waste of resources with significant negative effects on local growth and effective decentralization. The focus of our analysis is municipality mayors since they mediate the relationship between central government and voters and hence can influence the effectiveness of any potential pork-barrelling activity. A novel panel data set combining the results of two local and three national elections with annual municipality budgets is used to run a fixed-effects econometric model. This allows us to identify whether the political alignment between mayors and central government affects municipality financing. We examine this at different stages of local and national electoral cycles, investigating both direct intergovernmental transfers (grants) and the remaining sources of local revenues (own revenues, loans). We find that total revenues are significantly higher for aligned municipalities in the run-up to elections due to higher intergovernmental transfers. We also find evidence that the 2008 crisis has reduced such pork-barrelling activity. This significant resource misallocation increases vertical networking dependency and calls for policy changes promoting greater decentralization and encouraging innovation in local revenue raising.
This paper theoretically underpins the idea of greater involvement of local governments in the overall development of India explained through the theory of Fiscal Federalism. The theory outlines the dynamics of decentralization of power and functions through a multi-layered governance system leading to a new structure and added functions, finance, and accountability to local government. The paper also provides an overview of the increasing role of urban local governments in India and investigates whether the Urban Local Bodies (ULBs) of Gujarat – a state in India, are efficient to perform the functions and responsibilities assigned to them by the 74th Constitutional Amendment Act (CAA). It scrutinizes the financial health of local governments in the urban regions of India. The results based on the application of MANOVA indicate that the 74th CAA empowered ULBs with a strong economic base that these ULBs are capable of mobilizing their own resources. This means that smaller municipalities must develop and convergence must be supported by a proportionate level of grants. This will ensure that with the development of social infrastructure, economic activities will increase, and, as a result, the conversion will occur.
Julio López Laborda, Fernando Rodrigo, Eduardo Sanz Arcega
A necessary condition for the efficiency gains that the theory of fiscal federalism attributes to decentralization to be effective is that citizens rightly assign the governmental responsibility for public action. However, surveys show that most Spaniards are unable to correctly identify the taxes received by the various levels of government. Exploiting the 2015 wave of the Spanish Institute for Fiscal Studies’ Fiscal Barometer, this paper empirically determines the profile of citizens who are best able to identify the allocation of taxes among levels of government in Spain. The estimates suggest that these citizens are those who are able to identify the government that provides the services financed by those taxes, who correctly identify other taxes received by the same government, who reside in a chartered (“foral”) region, and who enjoy a high level of education.
Qurat ul Ain, Tahir Yousaf, Yan Jie, Yasmeen Akhtar
This paper provides empirical evidence on the association between post-2001 devolution reform policy, government size, and specifc components of government expenditures based on a sample of panel data of provincial units in Pakistan from 1990 to 2015. The results demonstrate that devolution is associated with a larger government size, which provides empirical support for the common-pool hypothesis, implying that the decentralization that matters for the size of the general government depends on how sub-national governments finance their expenditures. Moreover, the fndings suggest a signifcant increase in the magnitude of Health and education facilities at the local level following the devolution reforms.
2008 yılında bir makale ile ortaya çıkan, kriptoloji biliminden faydalanan ve dijital bir sanal para birimi olan kripto para, son yıllarda en çok tartışılan ekonomik kavramlardan biri olmuştur. Bu çalışmada yatırımcı ilgisini temsil eden Google arama sayılarının paylaşıldığı Dünya geneli Google Trends “Bitcoin” aramaları ile Bitcoin/USD fiyatlarındaki değişim arasındaki ilişkiyi incelemek amaçlanmıştır. Diğer bir ifade ile Google aramaları ve Bitcoin/USD”nin birbirleri üzerinde açıklayıcı bir etkileri olup olmadığı tespit edilmeye çalışılacaktır. Bitcoin/USD verileri investing.com adresinden, Trend verileri ise https://trends.google.com/ temin edilmiştir. Araştırılan veri seti 26.04.2015 ve 19.04.2020 arasındaki haftalık 261 gözlemden oluşmaktadır. Bu çalışma da, Bitcoin/USD ile “Bitcoin” kelimesinin aranma sayısı arasındaki ilişki ARDL testi ile incelenmiştir. Fiyat değişkeninin(Bitcoin/USD) logaritmik değişkeni oluşturulmuştur. Philips Perron (PP) ve Geliştirilmiş Dickey Fuller (ADF) birim kök testleri ile serilerin durağanlıkları kontrol edilmiştir. Fiyat değişkeni (Bitcoin/USD) I(1) birinci farkta, Bitcoin değişkeni (Google trends) I(0) seviyede durağan olduğu sonucuna ulaşılmıştır. Daha sonra değişkenleri arasındaki ilişki ARDL ile incelenmiştir. ARDL testi sonuçlarına göre, kısa ve uzun dönemde aralarında bir ilişkinin varlığına ulaşılmıştır. Yapılan sınır testine göre bu iki değişken arasında eş bütünleşme var olduğu kanıtlanmıştır. Ayrıca yapılan Granger Testine göre Bitcoin google arama sayısı ile (Fiyat) Bitcoin/USD arasında tek yönlü bir ilişkinin varlığı elde edilmiştir. Bitcoin/USD Fiyatlarında bir değişim insanları google üzerinden bitcoin aramasına itmektedir. Bu sonuçlar Bitcoin’in halk arasında merak edilen ve takip edilen bir sanal para birimi olduğu, bu parada meydana gelen bir hareketliliğin bitcoin’e olan ilgiyi artırdığı sonucuna ulaşılmıştır. Elde edilen veriler Stata 14,2 programı ile analiz edilmiştir.
In this thesis, we examine the political economy of public finance. I provide a general introduction to the thesis in Chapter 1. In Chapter 2, I examine the determinants and interrelationship of different types of government expenditure using data on 73 countries for the period 1990-2016. The results show foreign aid receipts and urbanization have raised total expenditure, but external debt stocks have reduced total expenditure. Also, there is a substituting relationship between expenditures on social protection and pure public goods, and education and defence, but complementary relationship between all other categories of government expenditure. \nIn Chapter 3, we provide an up-to-date empirical assessment of the relationship between economic globalisation and government spending for the ‘hyper-globalisation’ period of the 1990s and 2000s. The results suggest that hyper-globalisation has had divergent and conflicting effects on consumption spending: while the globalisation of trade has tended to raise spending, the globalisation of finance and foreign investment has tended to reduce it. However, the size of the effects is quite small, and there is no evidence that spending has risen by more in countries which are particularly prone to terms of trade shocks. \nIn Chapter 4, I examine the mediating effect of democracy in explaining the relationship between decentralization and government size for the period 1970-2013. I proxy decentralization by fiscal decentralization, use total spending as our primary measure of government size, and adopt the V-Dem high-level democracy indices as measures of democracy. I use the fixed effects estimator with Driscoll-Kraay standard errors and the instrumental variable estimation technique. Our main finding is that fiscal decentralization and democracy in themselves are effective tools to ‘starve the beast’ as they lead to reduced government size, with the former suggesting support for the Leviathan hypothesis. I find evidence of the mediating effect of democracy in the relationship between decentralization and government size; a positive and statistically significant effect of the interaction term with the effect size largest for participatory democracy. We do not find a non-linear relationship between decentralization and government size. \nIn Chapter 5, we examine how local governments’ political alignment with the central government affects subnational fiscal outcomes. We analyze data from Ghana, which has a decentralized political structure with substantial political and fiscal powers delegated to the district level, and high dependency on intergovernmental transfers. Using a regression discontinuity design for a new dataset for 1994-2014, we find that districts with an aligned Member of Parliament and District Chief Executive (DCE) receive more transfers and have higher expenditures. In a second step, we instrument transfers and estimate a flypaper effect for Ghanaian districts.