The traditional approach of public choice suggests that decentralization in the form of a fiercer competition may play an efficient constraint on the growth of self-interested governments. This paper analyzes the effect of decentralization on Leviathan state governments in the presence of intergovernmental grants provided by a federal layer. Under decentralized leadership, state governments strategically set their tax policy and wasteful consumption of public expenditures by anticipating the reaction of the federal government in terms of grants. The transfer scheme eliminates any incentive to engage in tax competition. However, it also creates an opportunity for state policy-makers to pass the financing of a part of their inefficient expenditures onto other members of the federation. In contrast to the conventional wisdom of public choice that focuses on simultaneous central and local decisions, increased competition in the decentralized leadership equilibrium might reduce citizens welfare. Decentralization enhances the sharing of wasteful expenditures and the incentives to extract rents from tax revenues. The conditions under which more competition leads to higher wasteful expenditures and welfare worsening are derived.
Decentralized Autonomous Organization (DAO) is a blockchain-based governance structure allowing all shareholders to participate in daily decision-making through voting on proposals. However, as centralization trends of blockchain documented in previous literature, voting delegation is on the rise for governance efficiency. This paper utilizes a DeFi company called MakerDAO to analyze the efficiency of such delegation design on DAO. Firstly, the delegates have demonstrated their expertise, thereby more likely to participate in voting and make well-informed choices. Secondly, voting delegates may prioritize personal interests over the collective interests of MakerDAO when their interest conflicted with MakerDAO is large enough and they gain sufficient voting power to influence the voting outcome. Thirdly, market monitoring can generally reward (punish) delegates for correct (wrong) votes through giving new or withdraw old delegations. Whatâs more, delegates with skills will be further rewarded. However, it remains challenging to consistently penalize delegates whose interests misalign with those of DAO, even when their holdings are transparently visible. This paper contributes to literatures on the evolutionary process of decentralized designed platform to be centralized or reintermediated.
Since the emergence of environmental federalism theory in the 1960s, the empirical research on it has been pursued by scholars, mainly focusing on whether a countryâs environmental regulation should be centralized or decentralized. For a long time, countries have been actively exploring and putting environmental governance systems into practice for themselves, especially at present, in the face of multiple constraints of resources, environment, sustainable development power and other factors. How to build an appropriate environmental governance system and promote the level of green development by encouraging enterprisesâ technological innovation is a practical problem to be solved urgently. Based on this, this paper constructs a new research framework of environmental decentralizationâtechnological innovationâgreen total factor productivity (GTFP) and investigates the effect and mechanism of environmental decentralization on GTFP. The results show that environmental decentralization can reduce the quality of environmental information disclosure and inhibit the innovative output of enterprises, ultimately leading to the decrease of GTFP. Environmental decentralization has a spatial spillover effect on GTFP, which can promote GTFP in neighboring areas. This paper tries to enrich the research results of traditional environmental federalism theory, the âPorter Hypothesisâ, and growth pole theory, and it provides a solution to enterprisesâ financing constraint problem.
Decentralized finance (DeFi) is a novel financial model, that uses the distributed ledger technology. It aims to offer financial services such as trading, investing, peer-to-peer borrowing and lending, access to fiat currencies, transfer of money globally, and managing insurance and credit services. Further, these services are offered without relying upon intermediaries like banks or other financial institutions. This leads to, both lower costs and entry barriers. On the other hand, as of today, there is no safety net for such activities. Therefore, its benefits should be balanced with its associated risks.
The literature continues to debate the effects of democracy and fiscal capacity on economic growth, both partially and jointly. To remedy the literature puzzle, this study examines the economic growth effects of democracy and fiscal capacity in 34 Indonesian provinces from 2016 to 2021. Using a fixed-effect model, this study documents no evidence of a partial effect; rather, it finds a joint effect of democracy and fiscal capacity on Indonesian economic growth. These findings remain relatively robust even when provincial heterogeneity, COVID-19 pandemic shocks, and sectoral composition are factored into the model. This finding indicates that regions with democracy and strong fiscal capacity possess relatively fast per capita GRDP growth. Based on these findings, the study concludes that democracy and fiscal capacity should exist side by side. Indonesia's sub-national economic growth strategy, like a tango game, requires reforming two types of decentralization: political decentralization to improve the quality of democracy that upholds the merit system and fiscal decentralization to expand local tax capacity to finance public goods productively.
Cenay BabaoÄlu, Lucie SobotkovĂĄ, Martin Sobotka, Murat AltuÄ KöktaĆ Â· 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 â 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.
Since the revival of the local autonomy system in 1995, decentralization of local autonomy has emerged as a major national task in almost all governments, and many discussions have been made on it. As the Decentralization Act defines decentralization of local autonomy and emphasizes the importance of local finance in local autonomy, the autonomy and finance of local governments is essential to complete autonomy and decentralization. Just as it is difficult to conclude that the right to self-government is clearly recognized by the current constitutional provisions, the legal guarantee for self-government and finance is not very high compared to the number of articles in the law. In particular, it may be close to impossible to increase the sovereignty of taxation within the limits of the ideology of the rule of law. The local financial system in Korea was prepared and operated for convenience in administrative management, but since the era of democratization, it has developed in the direction of promoting fiscal soundness while reflecting many factors of autonomy. Since 2005, it has been organized to some extent in the form of âRevenue Authority - Appropriation Authorityâ. However, in the legal system, the link between the Local Autonomy Act and the Local Finance Act is loose, and there are many overlapping articles, so the hierarchy of laws is not established. The general legal nature of the Local Finance Act is also somewhat skeptical. Individual laws can be evaluated without encompassing them. This is especially true when it comes to grants and subsidies. The need to strengthen fiscal decentralization is becoming more and more urgent, but the first thing to do is to face the barrier of tax legalism. Even taking into account the recognition of the ordinance enactment and the flexible tax rate, it is difficult to see it as a practical autonomy. Coexistence can be promoted through active interpretation in the current constitutional system, but there are essential limitations. With reference to extra-legislative tax under the Japanese constitution, autonomous finance under the French constitution, and the distribution of legislative power under the German constitution, the Korean constitution also requires a bold decision to recognize tax autonomy and autonomous finance. In addition to taxation, the scope of ordinance enactment rights on non-tax income such as fines for negligence is also a task that needs to be continuously reviewed in relation to the expansion of autonomous legislative power. We need to focus our attention and efforts so that the noble values of the democratic constitution, the ideology of the rule of law, and the vocation of the times, the decentralization of autonomy, do not collide and harmonize.
The purpose of this study is to test and analyze the influence of fiscal decentralization on development performance in Indonesia using the structural equation model approach. The data uses panel data, from 34 provinces and in 2015-2019 sourced from the Ministry of Finance of the Republic of Indonesia and the Central Bureau of Statistics (BPS). Data analysis using structural equation model approach with the help of Smart-PLS 3.3.3 software. The outer model evaluation results concluded that all indicators of fiscal decentralization variables and economic development performance variables are valid. The most powerful indicator reflecting the latent variable of fiscal decentralization is the ratio of regional income and economic development performance is an indicator of economic growth. The results of the evaluation of the inner model found that fiscal decentralization performance has a positive and significant influence on development performance. The existence of fiscal inequality among provinces in Indonesia causes uneven ratios of capital expenditures and public incomes as seen from the low indicator in reflecting decentralization of fiscal and economic performance
The fiscal dimension of decentralization covers the assignment of public spending responsibilities to subnational governments (SNGs), and how these are financed through local taxes, transfers, and borrowing. Revenues from local tax powers are inadequate and the scope for borrowing is limited for most SNGs outside wealthy urban areas. Consequently, the main source of financing for the local spending responsibilities of most SNGs is, and will remain, fiscal transfers (i.e., revenue-sharing and unconditional and conditional grant mechanisms). These show a wide variety of types and features around Asia. The challenge is to design such mechanisms in ways that promote equity in public spending across the national territory, and impart the right degree of local flexibility and the right incentives for SNGs.
Abstract Individuals in low-income countries often contribute significantly to financing local public goods through informal taxation. However, there is limited understanding of how informal revenue generation relates to formal tax and governing institutions. We explore the relationship between informal revenue generation, public finance, and the state in the Gedo region in south-central Somalia, relying on original data from surveys with 2,300 households and 117 community leaders. Our evidence shows that informal revenue generation by non-armed actors in Gedo is prevalent, with informal payments deeply embedded within clan-based and Islamic institutions and rooted in a long history of decentralized political authority and self-reliance in the region. We argue that in such a context, rather than explaining how or why things âworkâ outside of the state, it may be more relevant and valuable to consider decentralized non-state public authority as the default referent, with a need only to explain the puzzle of pockets of state effectiveness. Governance largely operates outside the state, with citizens playing a pivotal role in directly financing local governance institutions and public goods provision. These findings have important implications for our understanding of statehood and public finance in contexts of weak formal institutions.
In the practice of decentralization, the Revenue Sharing Fund for Tobacco Excise (DBHCHT) is given to tobacco-producing regions from the State Budget (APBN) in return for their contribution to state revenue. The management of the Tobacco Excise Revenue Sharing Fund is allocated to fund five programs, namely improving the quality of raw materials, coaching industry, social environment development, socialization of provisions in the excise sector, and eradication of illegal excisable goods with priority in the health sector to support the national health insurance program, especially increasing the quantity and quality of health services and economic recovery in the regions. In addition to the health sector, The Minister of Finance Regulation also allocates Revenue Sharing Fund for Tobacco Excise (DBHCHT) in the areas of community welfare and law enforcement.
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.
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 âProvince Managing Countyâ (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.
Ndamsa Dickson Thomas, Mbiydzenyuy Courage Sevidzem, Tangwa M. Wiykiynyuy
Much literature exists on fiscal decentralization and intergovernmental fiscal relations in sub-Saharan Africa, and some of the very salient policy actions that have impacted local government development have emerged from such literature. The developing world, including sub-Saharan Africa (SSA), has markedly promoted fiscal decentralization in the last three decades. However, many important aspects of fiscal decentralization in SSA and Cameroon, in particular, have not been addressed by existing literature. The main objective of this review paper is, therefore, to identify the literature gaps and design an agenda for future research in the areas of fiscal decentralization and intergovernmental fiscal relations that has the potential to impact policy and spur development in Cameroon. A qualitative research methodology (content analysis) is used to gather, group, and offer a critical look at existing literature on the benefits of fiscal decentralization and intergovernmental fiscal relations in sub-Saharan Africa. It uses an integrative review and a standardized approach of abstracting appropriate information from each article and performing an appropriate analysis of the literature survey of a few decentralized countries in SSA as the population focused on in the primary studies. This review paper recommends that areas for further research on FD in Cameroon should include: Types of funding autonomy desired by local government councils in Cameroon; Revenue sharing formulas that are good for Cameroonâs economic development; How central government transfers enhance local revenue mobilization in councils which share the same political affiliation as the ruling party compared to those who do not. Studies that point to new ways of generating supplementary financing at the local level in Cameroon to match the increased responsibilities due to decentralization are still rare. The percentage of shares of central government revenue transfers to local communities is necessary to reduce poverty and inequality, and what agency and criteria should be put in place to control the execution of these transfers? The above recommendations of this review paper will greatly inform theory, policy, and practice on fiscal decentralization realities in SSA as a whole and Cameroon in particular.
This study aims to analyze the effect of the Village Fund on poverty alleviation and improvement of basic infrastructure services for drinking water and sanitation in districts and cities in Indonesia. The need for evaluation of the Village Fund policy is a consequence of the implementation of fiscal decentralization to villages based on Law no. 6/2014. This policy has implications for an increase in transfer funds to villages of more than IDR 329 trillion cumulatively. Theoretically, fiscal decentralization to villages should improve public services and accelerate poverty reduction through local preferences matching and more efficient allocations. This research was a quantitative study using path analysis to test the hypotheses. Data were obtained from BPS and the Ministry of Finance for all districts/cities receiving Village Fund. The results show that The Village Fund had a significant effect on poverty reduc-tion nationally, although its contribution was very small, and the effect was not significant in districts/cities with low fiscal capacity. The Village Funds had an effect on increasing drinking water but not significant, on the other hand, it had a significant effect on districts/cities with medium or low fiscal capacity with low poverty rate. The Village Fund had an effect on improving sanitation but it was not significant nationally or in all districts/cities. The Village Fund for drinking water had no significant effect on poverty reduction nationally and for all districts/cities. The Village Fund for sanitation had no effect on poverty reduction nationally or in all districts/cities but it had an effect on districts/cities with low fiscal capacity and poverty rate even though it was not significant. The implementation of the Village Fund policy needs to consider the fiscal capacity and diversity of regional characteristics in order to make the effectiveness of the Village Fund more optimal.
<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 Zambiaâs Local Government: Designing a Local Government Framework <strong>Author:</strong> Moffat Tembo, Dr. Erastus Mishengâu 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>
One form of the implementation of regional autonomy is the existence of autonomy in the aspect of regional financial management which is called fiscal autonomy. Fiscal autonomy is the delegation of responsibilities and the distribution of power and authority for decision-making in the fiscal sector, which includes both revenue and expenditure aspects. Fiscal decentralization is linked to the duties and functions of local goverment in providing public goods and services. This study aims to analyze the degree of fiscal decentralization in Southeast Sulawesi Province in 2016-2020.The degree of fiscal decentralization is a measure of the ability of local goverment in order to increase Local Own Revenue which is used to finance development in Southeast Sulawesi Province. This is study uses secondary data. The analytical tool used in this study is quantitative analysis, namely the analysis of the degree of fiscal decentralization, namely the ratio between Regional Original Income and Total Revenue Regional. The results showed that the degree of fiscal decentralization of Southeast Sulawesi Province in 2016-2020 fluctuated with an average 0f 25,25% so it could be said that it was still in the moderate category.
Chapter 8 examines the economic and fiscal dimensions of decentralization in the Islamic Republic of Iran. It presents a comprehensive empirical picture of fiscal decentralization and municipal finances under the IRI, which up till now has been a black box to Iran scholars. This chapter provides a look inside by describing the structure of subnational finance in Iran by analyzing a unique dataset I assembled covering the first phase of decentralization (1998â2006) covering almost 90 cities over an eight-year period â the result of the only comprehensive empirical study of municipal finances in Iran to date. This dataset provides a picture of the revenue and expenditure responsibilities of municipalities. The chapter explores the incentive structure of local government actors and the extent to which the political economy of fiscal decentralization in Iran supports or hinders the three projects for local government laid out throughout the book so far. It shows that local governmentâs lack of financial autonomy â explicitly constrained by tax, administrative, and local government laws â both distorts broad democratic participation and weakens the capacity of local governments to stimulate local economic development. The chapter highlights that the failure of the original decentralization reforms to put local economic development as a core priority has led to a failure in this regard, a major shortcoming of decentralization Iran to date.