This paper examines the impact of government investment by the local government to stimulate the local economy and social security expenditure to protect the poor in the local economy. Unlike government expenditure by the central government, the local government expenditure may suffer from efficiency loss due to the absence of nationwide `planning' and `coordination.' This paper, using the Korean panel data, empirically show that the government investment to stimulate the local economy incurs efficiency loss due to `coordination failure,' while the social security expenditure does not. The result requires us a cautious and precise approach to 'decentralization of public finance unlike decentralization of political power.
This study aims to determine the effect of fiscal decentralization on capital expenditure in the Districts and Cities of West Nusa Teggara in the period of 2011-2021. In this study, fiscal decentralization is represented by Original Regional Revenue (ORR), General Allocation Fund (GAF), Special Allocation Fund (SAF), and Reveneu Sharing Fund (RSF). The resources of data used are budget realization report of 10 Regency/City Regional Government Province of West Nusa Tenggara that was published at the Directorate General of Financial Balance Ministry of Finance. The type of research is quantitative. Data analysis using panel data regression analysis which is used the combination period/years of 2011-2021 time series data and used the crosssection data of 10 Regency/City Regional Governments in Province of West Nusa Tenggara. The results of the study show that Original Regional Revenue (ORR) has a insignificant effect on capital expenditure. General Allocation Fund (GAF) has positive and significant effect capital expenditure. Reveneu Sharing Fund (RSF) has a positive and significant effect on capital expenditures. Special Allocation Fund (SAF) has a positive and significant effect on capital expenditures.
Abstract This chapter focuses on the diversities within the Spanish State of Autonomies, shedding light on the asymmetrical nature of the devolution process, with an emphasis on the transformation of the constitutional framework concerning tax and finance power decentralization, juxtaposing Spanish Fiscal Federalism within the broader context of the European Union. An exploration of intergovernmental tax relations uncovers the limited efficacy of mixed commissions, leading to an assessment of the Spanish Constitutional Court's central role in mediating conflict. The analysis concludes by looking forward, speculating on the potential future trajectories of Spanish fiscal federalism.
The process of fiscal decentralization, as a typical feature of contemporary societies, implies the transfer of public functions and public revenues from higher to lower levels of authorities in order to ensure the financing of the transferred functions. The trend of fiscal decentralization has created the increased need for own revenues of local self-government units. The rates of these revenues are determined by local authorities, either independently or in line with the statutory limits. In the Republic of Serbia, own revenues of local self-government unit include different local public utility fees. In this paper, the authors deal with the financial autonomy of local self-government units observed through the lens of local public utility fees, (i.e. their yields), whereby the research will be limited only to the local self-government units in the territory of Autonomous Province of Vojvodina. The authors will also attempt to determine the factors that affect the rates and abundance of these revenues of local self-government units.
Fiscal decentralization is the transfer of responsibility between the provision of public services and sources of financing by the central government to lower levels of government, with the outcome depending on how the process itself is devised and implemented. Proper and balanced implementation of fiscal decentralization leads to economic growth, achieving economic goals that can bring economic benefits. In addition to economic benefits, decentralization could lead to greater accountability, transparency, and citizen engagement, which would also improve the level of democracy in society. Since 2002, the Republic of Croatia has secured a significant amount of financial resources through the system of tax revenue sharing and aid allocation, which has significantly improved the fiscal capacity of all local units. The impact of fiscal decentralization in the Republic of Croatia on economic growth was tested using a panel analysis. From the results obtained, there is a significant positive relationship between fiscal decentralization and economic activity, and based on the results obtained, it can be concluded that fiscal decentralization in the Republic of Croatia had a positive impact on economic growth. This also confirms the role of lower levels of government established to improve the quality of life of citizens by deciding on the provision of local public services close to where they are provided and close to the users, providing better education, social and health services and infrastructure, thus positively influencing economic growth. In further research, it is necessary to focus on the creation of a better system of financing lower levels of government and on the fiscal autonomy of local units in the Republic of Croatia, in order to make the impact of fiscal decentralization on economic growth even more evident and to have as much influence as possible on the even development of the Republic of Croatia.
Abstract A quarter of a century after decentralization reforms began, local governments in Japan find themselves standing at a crossroads. The role of local autonomous bodies in the government sector is exceedingly huge. On the other hand, significant financial disparities continue to exist among local governments. The level of administrative services has been left to the discretion of the regions due to decentralization reforms. When we consider the full-scale arrival of a society marked by a declining birthrate, aging population, and depopulation, it is uncertain as to whether the current system is sustainable. In this chapter, the author will focus on the organizational structure and operations of local governments and go over their basic structure and operational reality. It can be said that the ability of local governments to proactively and flexibly deal with the various challenges faced by Japan rests on this point. Going forward, local governments are expected to be the driving force behind open innovation at the will of the local community as they aim to cultivate a society rich in diversity in accordance with actual local conditions while coordinating with various actors.
Carol Nalubanga, Edmand Bakashaba, Muhammad Sendagi
Background. Aim: To determine the relationship between municipal government revenue collection and service delivery in Rukungiri Municipality. Methodology A case study, descriptive, cross-sectional research design was used for this study. The study adopted both qualitative and quantitative approaches. A case study design was adopted because it enabled the researcher to carry out an in-depth investigation into the concepts under study. The entire population of Rukungiri Municipality is targeted in this research. Also, the municipality has 51 civil servants/technical staff, 20 political leaders (councilors) at municipal and Division levels, 20 taxpayers, 7 service providers, and 25 community projects’ beneficiaries. This is based on different stakeholders’ information relevance in their respective positions. Therefore, the population of the study was 1400 people. A sample of 302 respondents were selected Results One of the findings mentioned is the importance of local revenue in decentralized societies. While it’s true that local revenue plays a significant role in financing local government operations and service delivery, it is important to consider the capacity of local governments to effectively collect taxes. Many local governments in developing countries face challenges in revenue collection, including limited tax bases, weak tax administration capacity, and high levels of tax evasion and informality. Therefore, simply relying on local revenue may not be sufficient to meet the financing needs of local governments and ensure adequate service delivery. Conclusion The findings indicate that there was a positive and moderately strong relationship between revenue collection and service delivery (r = 0.719). This relationship implies that the municipality is using its collected revenue to fund its expenditures for service delivery. Recommendation Strengthen local revenue collection: Rukungiri Municipality should enhance its capacity to collect local taxes and fees efficiently. This can involve investing in modernizing revenue collection systems, training staff, and conducting public awareness campaigns to ensure compliance.
Decentralization is meant to improve public services, but relatively few studies examine this question empirically. Poverty, inequality and social exclusion are deeply-rooted structural and historical phenomena in Kenya. Successive Kenyan governments have attempted fiscal decentralization as a way of ensuring the country achieves equitable development across the many regions. Fiscal decentralization consists primarily of devolving revenue sources and expenditure functions to lower tiers of government. By bringing the government closer to the people, fiscal decentralization is expected to boost public sector efficiency, as well as accountability and transparency in service delivery and policy-making. Decentralization also entails greater complexity in intergovernmental fiscal relations. Coordination failures in fiscal relations are likely to have a bearing on the fiscal positions, nationally and sub nationally. The purpose of this project was to find the factors that are detrimental to the management of the devolved funds in two levels of government. Increased local financing after fiscal decentralization has opposite two effects, that is, (1) the local finance derives incentive for effective management, and (2) it may induce the lack of public resource for managing public expenditure, which is particularly needed in the basics of managing the lower levels of government. This project analyzed the detrimental factors that affect management of fiscal funds by a county government. The objectives used by this study were; To establish the effects of corruption in the management of devolved funds in Nairobi City County, to determine the effect of accountability in the management of devolved funds in Nairobi City County, to determine the effect of financial regulations in the management of devolved funds in Nairobi City County and to establish the effects of adoption of IFMIS in the management of county funds in Nairobi City County. The study adopted a descriptive research design. From the findings, Accountability, Adoption of IFMIS, and Financial Regulations were found to have positive and significant effect on Financial Management while the effect of corruption was found to have a negative relationship with financial management. From the findings and conclusions therefore, this study recommended that Nairobi County Government consider Accountability, Adoption of IFMIS, and Financial Regulations as the key factors that could determine the management of devolved funds.
Decentralization holds a significant role in the context of decentralized autonomous organizations (DAOs), with its nature being not a fixed value but a comparative spectrum. Prior research investigating the measurement of decentralization in nations’ governance system provides a foundation for our current study. This research aims to integrate these insights to define dimensions and indicators, tailored explicitly for assessing decentralization levels within DAOs. Then, the article undertakes an examination of the suitability of traditional decentralization measurement approaches within the unique DAO context, employing confirmatory factor analysis (CFA) as our analytical tool based on a total of 44 DAOs. Hence, the results suggest that DAOs have three dimensions for measuring decentralization, ‘political decentralization as a participatory engagement’, ‘economic decentralization as a resource distribution’, and ‘administrative decentralization as the self-governing execution of decisions’. By substantiating the applicability of established decentralization measurement frameworks within the unique context of DAOs, the findings not only enhance the understanding of this emergent governance paradigm but also provide DAO practitioners, policymakers, and researchers with invaluable insights.
This ADB and OECD copublication analyzes subnational governments (SNGs) in Asia and the Pacific and assesses ways to bolster their financial resources and build capacity so they can more effectively support sustainable economic development. It looks at decentralization reforms in 26 countries, outlines the significant social and economic role of SNGs, and assesses their expenditures, fiscal frameworks, and debt levels. It considers how steps such as enhancing intergovernmental coordination and bolstering public financial management would help support effective multi-level governance and strengthen subnational finances.
We exploit the public good attributes of Ganges water pollution cleanup and theoretically analyze an aggregate economy of two cities—Kanpur and Varanasi—through which the Ganges flows. Our specific objective is to study whether water pollution cleanup in these two cities ought to be provided in a centralized or in a decentralized manner. We first determine the efficient cleanup amounts that maximize the aggregate surplus from making the Ganges cleaner in the two cities. Second, we compute the optimal amount of water pollution cleanup in the two cities in a decentralized regime in which spending on cleanup is financed by a uniform tax on the city residents. Third, we ascertain the optimal amount of water pollution cleanup in the two cities in a centralized regime subject to equal provision of cleanup and cost sharing. Fourth, we show that if the two cities have the same preference for pollution cleanup, then centralization is preferable to decentralization as long as there is a spillover from pollution cleanup. Finally, we show that if the two cities have dissimilar preferences for pollution cleanup, then centralization is preferable to decentralization as long as the spillover exceeds a certain threshold.
Abstract Local democratization aims to improve the decentralized capacity of governance regimes to generate meaningful municipal spending geared towards realizing societal outcomes. In the late 1990s, following the Asian financial crisis, Indonesia initiated a significant institutional transition from centralistic and authoritarian rule towards decentralized and more democratic governance through the introduction of direct mayoral elections. Extant research analyzed the effects of the introduction of these elections on local public spending and local societal outcomes separately. This paper offers an integrated analysis of the impact of the introduction of direct mayoral elections on both local public spending and local societal outcomes in 456 Indonesian municipalities between 2002 and 2012. Analyses of growth models, using panel data on three domains (education, health, and infrastructure) provided by Indonesian Ministry of Finance, Indonesian Ministry of Home Affairs, and Statistics Indonesia, show that the introduction of direct mayoral elections in Indonesia resulted in an increased growth in educational expenditures. It also improved outcomes in health and infrastructure domains. However, the introduction of direct mayoral elections reversed a positive association between public spending and the attainment of societal outcomes or worsened a negative association between them. These results would support a view on local democratization in Indonesia asserting that the introduction of direct mayoral elections stimulated local clientelist practices rather than local accountability and policy responsiveness.
To achieve the goal of long-term stable poverty reduction, it is necessary to implement not only economic poverty reduction but also natural poverty reduction and formulate a green and sustainable economic growth pattern, and finance is an effective means to affect economic poverty reduction and natural poverty reduction. This paper innovatively calculates the natural poverty index of 1712 county administrative units in China based on BP neural network and combines relevant county data to investigate the impact of county fiscal decentralization on natural poverty and its transmission mechanism from 2000 to 2020 using a two-way fixed-effect model, which provides a new interpretation perspective for green economy patterns and sustainable development. The main research results are as follows: First, the increase in county-level financial autonomy in China significantly increases the level of regional natural poverty, which is still valid after a series of robustness tests using the instrumental variable method, replacing the response variables and processing with a one-stage lag. Secondly, heterogeneity analysis shows that, on the one hand, the positive impact of county-level fiscal decentralization on the natural poverty index is different in regions with different natural poverty formation mechanisms. On the other hand, the reform of “provincial direct management of counties” has significantly improved the natural poverty situation in counties, indicating that an extensive fiscal and taxation system in the early stages of economic development aggravates regional natural poverty and that optimized fiscal decentralization is conducive to the alleviation of natural poverty. Finally, the mechanism analysis found that the local income impact and expenditure preference accompanied by the fiscal decentralization of counties strengthened the race to the bottom of taxation, guided industrialization, hindered technological progress and led to the deterioration of regional natural poverty. This research claims that encouraging local governments to deepen and improve the fiscal decentralization system, implement the concept of green finance, improve the ecological protection compensation mechanism and market incentive system and implement differentiated mitigation plans for different natural poverty counties are the crucial factors to achieving natural poverty alleviation at the county level and improving regional ecological sustainability in the future.
This study aims to determine the extent to which the influence of the degree of decentralization ratio, the ratio of regional financial independence and the SiLPA financing ratio can affect the capital expenditure allocation of district/city governments in West Sumatra. Data analysis used multiple linear regression analysis. Based on partial testing, 1) it is found that the ratio of the degree of decentralization has a significant positive effect on the allocation of capital expenditure in districts/cities in West Sumatra Province. 2) The ratio of regional financial independence has a positive effect on the allocation of capital expenditures in districts/cities of West Sumatra Province. .3) finance in the form of the ratio of SiLPA financing rates has a positive and significant influence on the allocation of capital expenditures in districts/cities in West Sumatra Province.
In the mid-1990s I wrote the first English-language book on local government in Latin America (Nickson, 1995 ). At that time there were also very few works on the subject in Spanish or Portuguese. The tardy appearance of works on such a topic reflected the long history of centralization and the long-standing neglect of academic investigation of sub-national governance in the region. The information available was so limited that in the case of some countries (notably Argentina) it was even difficult to obtain an accurate figure on something as basic as the number of municipalities. The book covered the history of local government since the late colonial period, its legal status, its structure, local service provision, local finance, electoral system, administrative organization, citizen participation, and inter-municipal relations. It also provided descriptive profiles of municipal government in 18 countries in the region. Since then there has been an explosion of publications on local governance in the region, highlighting the transformation that has taken place in the wake of a major decentralization process than had begun a decade earlier. Several studies agree that a significant leap has been made in the level of decentralization in Latin America (Bossuyt, 2013 ; Carrera, 2013 ). This period of time is sufficient to assess the impact of this transformation.
In the past half century, fiscal decentralization has emerged as a critical policy issue among public finance scholars and policymakers around the world. Since 2001, Ethiopia has practiced fiscal decentralization at the district level by devolving certain functions and financial resources for the District Administration. The primary goal of this paper was to assess fiscal decentralization practices at the district level, as well as the challenges that local level authorities faced while implementing it. The paper focused on the intergovernmental fiscal relationship between the Regional and Local Governments (LG) of Oromia (representing the relatively “developed regions”) and Afar (representing the “emerging regions”) Regional States. We selected these regional states, not randomly, but purposively using various criteria such as fiscal capacity, population size and geographical area/distance, and infrastructure and human development. We used both primary (in-depth interviews and field observations) and secondary (published and unpublished sources) data. The key informants for in-depth interview and discussions were selected purposively from regional and Woreda institutions on the basis of their levels of knowledge on the subject under investigation while, the secondary data were analyzed and interpreted through a descriptive technique and presented in form of tables and figures in light of the study’s objective. The major findings show that the regional governments’ devolution of expenditure responsibility to the LGs is not accompanied by adequate financial resources, resulting in high vertical and horizontal fiscal imbalances in Ethiopia. As a result, LGs rely heavily on regional blocked grants to cover the costs of the functions devolved to them by regional governments. This, in turn, limits local governments’ fiscal autonomy and leads to less efficiency in public service delivery and accountability at the local level. This necessitates increasing LGs’ fiscal autonomy by devolving taxation authority in order to reap the potential benefits of effective fiscal decentralization system at the sub-national and national levels.
Fiscal decentralization has recently gained popularity throughout the world. This study examines how revenue decentralization influences subnational budgetary balances and how it affects the general government debt in the OECD countries. We applied panel regression analysis to an annual panel dataset that includes data from 23 countries from 1990 to 2020. Then, we explore the relationship between fiscal/revenue autonomy and public finance debt thus budgetary balances at the SNG level. Our empirical findings suggest that higher levels of SNG budget discipline are associated with greater revenue autonomy. The findings also suggest that general governments should consider delegating greater fiscal autonomy to SNGs to achieve better fiscal outcomes, including lower levels of general government public debt. This information could be useful for policymakers who are looking to implement sustainable fiscal stewardship.
Katherine Baer, Ruud de Mooij, Shafik Hebous, Michael Keen
Abstract Policy-makers are struggling to accommodate cryptocurrencies within tax systems not designed to handle them; this paper reviews the issues that arise. The greatest challenges are for implementation: crypto’s pseudonymity is an inherent obstacle to third-party reporting. Design problems arise from cryptocurrencies’ dual nature as investment assets and means of payment: more straightforward is a compelling case for corrective taxation of carbon-intensive mining. Ownership is highly concentrated at the top, but many crypto investors have only moderate incomes. The capital gains tax revenue at stake worldwide may be in the tens of billions of dollars, but the more profound risks may ultimately be for VAT/sales taxes.
India’s federal structure is unsuited to the localized demands of climate governance. It is highly centralized, with a federal government that enjoys fiscal, bureaucratic, and jurisdictional powers greater than in more classical, decentralized federations. Indian states, however, are responsible for several areas crucial to climate action, from water and health to the emissions-intensive electricity sector. This makes elaborate forms of cooperation between the two levels essential. In this chapter, we show that the federal system has organically begun evolving some institutions and practices to keep up with the demands of climate change, including climate-specific financing and capacity flowing from the centre to the states, and instances of bottom-up experimentation and learning. But these developments are uncoordinated and lack strategic direction; policies appear and fade away with regularity, unpegged to long-term goals or a plan to rectify top-heaviness in Indian climate federalism.