The chapter examines the theoretical foundations of regional development governance in the context of financial decentralization. It reveals the essence of decentralization as a process of transferring powers, resources, and responsibilities from central authorities to local self-government bodies. Particular attention is paid to financial decentralization as an important factor in strengthening the capacity of territorial communities, ensuring the effective use of financial resources, improving the quality of public services, and stimulating the socio-economic development of regions. The study analyzes the main scientific approaches to understanding decentralization, its forms, advantages, and potential risks. It substantiates that financial decentralization contributes to strengthening local autonomy, increasing citizens’ participation in solving local issues, enhancing the responsibility of public authorities, and creating prerequisites for the inclusive development of territories. At the same time, the chapter emphasizes the need for a balanced distribution of powers and financial resources between different levels of governance, the improvement of inter-budgetary relations, and the consideration of regional specificities in the implementation of decentralization reforms. The chapter is of scientific interest to researchers, specialists in public administration, regional economics, local self-government, and public finance, as well as to practitioners involved in the development and implementation of regional development policy.
In the article the state, trends and features of financing environmental measures by local budgets in Ukraine in order to justify the possibility of increasing the effectiveness of local communities expenditures on environmental protection were investigated. To this end, an analysis of local government expenditures, including budget environmental programs, the structure and dynamics of environmental tax revenues to the general and special funds of state and local budgets from 2010 through 2020 were analyzed. The distribution of environmental expenditures between state and local budgets, the financing mechanism for environmental protection and the mechanism of providing the local environmental fund have been studied. According to the results of the analysis, it was shown that in the conditions of decentralization, the volume of local financing of environmental measures has increased. However, a significant part (over 50%) of environmental funds was directed to non-priority goals and activities. The share of expenditures of the Environmental Protection Fund for the implementation of definitely environmental measures was low. This does not contribute to solving current environmental problems and does not increase the capacity of local budgets in terms of environmental expenditures. Significant (over 60%) centralization of the environmental tax revenues in the state budget creates unfavorable conditions for the ecological sustainability of some regions. It was established that the main function of the environmental tax – compensatory – is not fully fulfilled. The environmental tax was mainly directed to the implementation of the general functions of the state and territorial communities. In order to increase the efficiency of local budget expenditures on environmental protection, it is necessary to develop criteria for assessing the impact of environmental measures, normative definition of mandatory environmental effects in budget programs and strengthen state financial control over the targeted use of local budget funds.
Increased administrative discretion for human resource and financial management is commonly seen as a key component of efficient service delivery. However, the directive attitude of some central government officials in Tanzania undermines the administrative discretion of local councils to implement approved local plans and budgets. Using a case study of two local councils in Tanzania, this study investigated the influence of decentralization on administrative discretion and decision space. The findings show that local councils have little administrative discretion and decision space over human resources, financial management, and service delivery. The study calls for a comprehensive review of decentralization policies and local government legislation to address the allocation of powers and decision space of the institutional capacity of local councils to provide local services. Their roles and responsibilities should also be specified in the national constitution to safeguard them from the encroaching “directive culture” of central government officials.
Since 1946, Indonesia has adopted a decentralization policy that impacts the transfer of authority to regulate and administer government affairs in the regions, followed by financing to manage these affairs. In a unitary state, the power source, both in terms of financial management and administrative power, rests with the central government. This study uses a descriptive qualitative method to explain the history of the development of authority and financial balance policies in Indonesia and the meaning of decentralization policies in Indonesia. Quantitative descriptive was used to analyze data regarding the implementation of regional government affairs, personnel expenditure ratios, comparison of central and regional expenditures, and other data related to burdens and revenues between the center and the regions. This study found that the central government has recognized regional independence through income sources managed by themselves and reduced transfer funds that aim to cover the lack of regional revenues. The provision of sources of revenue from the central government to the regions is not proportional to the ratio of the burden given. The results of this study indicate that the load is inversely related to the budgetary capacity between the government and local governments. The imbalance between the workload and the source of revenue received by the region is the low ability of the region to provide basic services that are the authority.
Background: The concept of devolution has always presented significant controversy in African unitary states. It is often viewed with inherent suspicion and skepticism based on the lack of mutual trust between the people and the government. While proponents see it as a form of empowerment, resistant groups in society view the decentralization of government powers and responsibilities as a gateway to success. Despite the devolution agenda being a major component of local governance in the Zimbabwean Constitution of 2013, it would not be practically implemented until the new dispensation that rose into power in 2018. However, the coming in of the COVID-19 pandemic has significantly marred the take-off of devolution implementation in Zimbabwe. Whilst COVID-19 cases continue to escalate on the globe, African countries continue to battle not only with the second wave of the pandemic but also with the new COVID-19 variants. Already fragile economies of these countries, the governments were forced to prioritize the national budgets in response to the pandemic; consequently, other social and developmental issues were left behind. Objective: This study discusses the contemporary status of devolution in Zimbabwe to ascertain the extent of implementation; provide supportive legislation for devolution structures through recommendations; analyze devolution disbursements from 2019 before COVID-19 to date; assess the local authorities’ initial requests versus the disbursements in 2019 and 2020. Method: The researcher carried out a desk review and followed the principles of case study design by analyzing financial statements, reports and data coming in from the Councils and relevant Government ministries. The meaning was also derived by critically reviewing, organizing and interpreting related information from books and articles published in newspapers and journals. Result: Despite Section 264(1) of the Constitution providing for devolution of power to the three tiers of the Government, there is no supporting legislature in place as yet to actualize this key element. The Government Budgetary Allocation of 5% is not meeting local authority demands. Conclusion: The onset of the COVID-19 pandemic in late 2019 reduced the pace of the devolution process because the funds were channeled to fight against the virus. If properly practiced, devolution may be one of the solutions to the development of the Zimbabwean economy since the devolution program is largely founded on the principle of empowering provincial government councils and Local Authorities to spearhead economic and social development projects in their areas by leveraging on local resources. It may also solve issues of corruption in many local councils in Zimbabwe by improving accountability mechanisms, especially where sub governments are permitted to progressively compete with each other to establish innovative ways of delivering public services efficiently and inexpensively. Implications: The findings imply that the Government policies can affect the social and economic well-being of citizens, however, the COVID-19 pandemic has far outweighing impacts. Secondly, the coronavirus outbreak has proved how much the Government of Zimbabwe is ill-prepared to deal with a pandemic of this dimension. Policymakers should ensure that finances are set in the national budget for unseen events so as not to derail other Government projects. Originality: This paper is original and not sent anywhere for publication.
Governments of developing countries in Asia and the Pacific have been experimenting cautiously over the past decade and a half with policies and programs that seek to decentralize development planning and administration. Indonesia, the Philippines, Thailand and Fiji used provincial administrative units; Pakistan and Nepal created integrated rural development programs in which responsibility was deconcentrated to regional or district organizations; Malaysia and India used semi-autonomous authorities to pursue agricultural and rural development; and Sri Lanka strengthened district administration. In Thailand, Pakistan, the Philippines, Indonesia and Sri Lanka a central government ministry or agency played an important role in guiding or supervising the programs. In addition, it was authorized to give grants and subsidies to credit institutions that helped small scale farmers, provide technical and financial assistance to farmers in improving agricultural and livestock raising practices, and strengthen farm marketing and processing organizations.
The article considers the relationship between modern processes of budget decentralization and macro-financial policy of Ukraine. The focus on deepening decentralization processes in Ukraine remains unchanged. This emphasizes the use of the State Strategy for Regional Development for 2021-2027. The theoretical foundations of budget decentralization were introduced in the works of C. Tibet, W. Oates, E. Bracco, W. Tanzi, A. Aristovnik and other Western researchers. C. Oates defined the decentralization of fiscal powers as a benefit that could lead to a reduction in the size of the central government. This means reducing the tax burden by increasing competition from tax jurisdictions. For quantification at the level of an individual economy, it is possible to use the index of fiscal decentralization. This index consists of two sub-indices: the self-sufficiency index and the index of importance of subnational budgets. The OECD Fiscal Decentralization Database can be used as a source of information on fiscal decentralization. A retrospective analysis of economists has shown an increase in the index of fiscal decentralization and an improvement in the state of subnational entities in a favorable macroeconomic situation. On the contrary, the crisis worsens the conditions of subnational entities and is accompanied by a decrease in this index. With the beginning of the pandemic, there was a crisis situation regarding the macroeconomic support of further decentralization processes. Long-term social problems are deepening: demographic negatives, increasing external outflow of labor resources, shrinking the country's economy, progressive deindustrialization, high resource intensity of production, in particular, low energy efficiency, growing debt burden. The most destabilizing role is played by military events in the east of the country. High regional disproportion logically leads to a violation of the single economic space of Ukraine. The size of the budget deficit and public debt is increasing. The crisis has a significant impact on all macroeconomic processes, in particular, on the macro-financial stimulation of budget decentralization processes. The urgent task is to establish effective coordination of fiscal and monetary policy, as well as increase the capacity to attract loan financing. Extreme conditions force us to temporarily give up strategic intentions as such, which are not urgent. Public-private partnership can get another chance to become an effective mechanism of social interaction. Increasing competition between budgetary institutions and private institutions in these areas has the potential to increase the quantity and quality of public services.
Local governments in the Slovak Republic are important in public administration and form an important part of the public sector, as they provide various public services. Until 1990, all public services were provided only by the state. The reform of public administration began in 1990 with the decentralization of competencies. Several competencies were transferred to local governments from the state, and thus municipalities began to provide public services that the state previously provided. Registry offices were the first to be acquired by local governments from the state. This study aimed to characterize the transfer of competencies and their financing from state administration to local government using the example of registry offices in the Slovak Republic. In the paper, we evaluated the financing of this competency from 2007 to 2018 at the level of individual regions of the Slovak Republic. The results of the analysis and testing of hypotheses indicated that a higher number of inhabitants in individual regions did not affect the number of actions at these offices, despite the fact that the main role of the registry office is to keep registry books, in which events, such as births, weddings, and deaths, are registered.
Since the onset of the Great Recession, austerity has become more common at the national and local levels throughout the OECD. As states pass expenditure responsibilities down to the local level, this causes a shift toward mandatory spending at the local level which may undermine discretionary spending for social and physical infrastructure. We use Census of Government Finance data from 2012 for all county areas in the continental US to model the expenditure gap between current operations and capital investment, and show how this crowd out affects growth. Our structural equation models find fiscal decentralization has direct negative effects on local growth and indirect negative effects on growth by increasing the local current-capital expenditure gap. This local expenditure gap is larger where decentralization of spending responsibility is higher and state aid is lower, especially in places with greater need (poverty, older infrastructure, and rural areas). In contrast to the theoretical claims of fiscal efficiency, we find fiscal decentralization may be undermining local economic growth by increasing the gap between local current and capital expenditure. We argue that fiscal federalism (decentralization) is “broken” in the US because states have structural incentives to shift fiscal responsibility downward to local government, and local governments face increased social and economic need, especially since the Great Recession.
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.
Christine R. Martell, Tima T. Moldogaziev, Salvador Espinosa
Abstract This book argues that capital markets can be an important source of financing for subnational governments across the globe as they face decentralization of governance systems and increased demand for infrastructure at the local level. The central argument is that information resolution at both the national-level and the city-level is critical for the success of subnational capital markets. Furthermore, the chapter argues that subnational governments can and must become competent actors with regards to both top-down (national to local governments) and outside-in (financial sector firms to local governments) transactions and pressures. This chapter presents city policymakers with options for capital market access when both system credit contractibility and underlying credit quality vary by offering a typology of alternatives for capital financing. The chapter recommends policies that establish contractibility and credit quality assessment mechanisms and concludes with recommendations for future research.
Decentralizacija označava vrstu organizacije kojom se upravljanje prenosi sa središnjih organa vlasti na niže. Tako da ti niži organi imaju manju ili veću samostalnost u organizaciji poslovanja i načinu kako obavljaju poslove. U stabilnim društvima dolazi do veće decentralizacije organizacija, u vrijeme ratova i potresa organizacije teže strogoj hijerarhiji. Decentralizacija je zajednički naziv za niz mjera kojim se nastoji spriječiti prevelika koncentracija stanovništva i gospodarstva u jedno ili nekoliko središta, pri čemu veliki dijelovi zemlje ostaju bez stanovništva i imaju slabiji gospodarski razvoj. Decentralizacija predstavlja ograničenje političke moći i model povećanja djelotvornosti javne uprave. Postoji više podjela decentralizacije, a najviši stupanj teritorijalne decentralizacije je lokalna samouprava. U Republici Hrvatskoj postoje dva oblika decentralizacije: lokalna i regionalna samouprava kao oblik decentralizirane vlasti i aktivno sudjelovanja građana u donošenju odluka o javnim poslovima te lokalna uprava kao oblik decentralizacije upravnih službi radi približavanja građanima i učinkovitije organizacije upravnog sustava države.
The formation of balanced budgets and increasing the financial potential of communities, a clear division of powers on the principle of subsidiarity, improving the efficiency of financial resources and stimulating community development have determined the relevance of Ukraine’s implementation of best practices in decentralization. The aim of the paper is to analyse the effectiveness of the decentralization process in Ukraine and assess the possibilities of financing the development of united territorial communities, identify the benefits of the Polish experience and determine the areas for their implementation in Ukraine. During the research, the methods of logical generalization and synthesis, comparative analysis, rating and integrated assessment of the financial capacity of the communities in Lviv region of Ukraine were used. Based on the study of foreign, in particular Polish, experience of decentralization, the key reasons for its insufficient effectiveness in Ukraine have been identified. The priority directions of the state policy are proposed and substantiated, and their implementation will allow to increase the efficiency of decentralization in Ukraine.
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 fundamental problem confronting most local authorities, especially those managing cities in developing countries, is the widening gap between the availability of financial resources and municipal spending needs. One of the main reasons for this increasing fiscal gap is the rapid growth of urban populations, which creates an ever-increasing demand for public services, new public infrastructure, and its maintenance. Most cities in developing countries depend mostly on central government transfers, with lesser revenues derived from property taxation and service charges. The main aim of this study is to review the scholarly published documents regarding the responsible governing system of the local government in the developing economy and to observe the challenges to them to manage fiscal imbalances. Looking at the practice of fiscal federalism and economic decentralization, there is no uniformity in the global experience. Developed countries are at the forefront of this agenda while developing countries have different experiences. It is important to find the right path with the appropriate solution to the problem seen from the international experiment and move forward accordingly. It is important not only to make laws but also to achieve prosperous prosperity through their proper use and for that it is important to understand that the implementation of the law should be done in the right spirit.
Ke Huang, Yi Mu, Fatemeh Rezaeibagha, Xiaosong Zhang
This chapter summarizes all enumerated works to derive some empirical knowledge and generalizes some open problems as future challenges. This chapter concludes as follows: (1). The practical design and analysis of cryptographic schemes for blockchain can address significant problems in blockchain at the algorithmic level. This type of research has received popularity from both global cryptographic community and blockchain developer&s;s community. This research field is the most fast-developing region of all research areas. (2). The intrinsic deficiencies in some traditional cryptographic primitives, like ring signature, IND-CCA2 secure encryption, zero knowledge, etc, prevent the successful application of these primitives in the blockchain. However, tremendous efforts are being made to make these primitives practical and applicable by researchers. Hopefully, we can derive efficient and practically-secure zk-SNARKs or public key schemes as building blocks or overlays for blockchain in the near future.} (3) The formal and rigorous design and analysis of public key cryptographic algorithms matters to the researches and development of blockchain. In cryptographic academia, it is generally recommended to design and analyze cryptographic schemes strictly by practising provable security theory, complexity theory, and proof techniques to validate proposed schemes.
Presents evidence from seven country case studies—Sudan, Uganda, Indonesia, Colombia, Brazil, Bulgaria, and China—on how intergovernmental fiscal transfers have strengthened education systems and improved education outcomes, exploring how these countries have used transfers to (1) provide adequate basic education funding; (2) narrow education inequalities; (3) increase efficiency; and (4) incentivize better performance from various actors in the education sector, drawing mostly on the evidence presented in the case studies, but also including examples from other countries, mostly high-income countries, where necessary with some principles for the design and implementation of effective transfers for education. The case study countries differ in their stages of economic development and the number and size of their subnational jurisdictions. Gross national income (GNI) per capita varies from US$590 in Sudan to over US$10,410 in China. Although all of the case study countries have decentralized, considerable variability exists in the size of the basic education systems their sub-national governments manage.
Shows how China improved the adequacy and equity of government educational expenditure and how the changes improved education outcomes by (1) describing the education finance system and its changes over time, focusing on pretertiary education and on the decentralization of education funding and provision; (2) discussing how the evolution of the education finance system has affected the adequacy and equity of education spending and development; and (3) recognizing the challenges to the current system, particularly with regard to equity, and offering some potential policy solutions. Subnational governments, particularly counties, remain primarily responsible financing and administration of pretertiary education. However, there exists a large and growing cascading system of financial transfers from the central government to local governments aiming to help equalize educational funding across regions. Nevertheless, inequality remains one of China’s biggest challenges and will require the central and provincial governments to considerredistribution across regions and improve incentives to support schools in poor regions.
Outlines key principles of fiscal decentralization, as drawn from the academic literature, including: (1) the rationale for devolving service provision and financing responsibilities to subnational governments; (2) guidelines for assigning particular expenditures and revenues across levels of government; and (3) a framework for designing and allocating intergovernmental transfers. The decentralization of responsibility for the provision and financing of services from central governments to subnational governments remains a pervasive phenomenon in developing and transition countries. In theory, decentralization results in a better match between subnational public service delivery and diverse citizen preferences. The most commonly stated objectives for intergovernmental transfers include adequacy, equity, efficiency, and performance. In general, individual types of grants require matching with objectives. The impact of intergovernmental fiscal transfers on subnational education spending depends, in theory, on the type of transfer. Conditional transfers have a larger effect on education spending than general transfers, because subnational governments must spend targeted conditional transfers in the education sector.
Purpose This paper aims to study the impact of municipalities’ own resources on their investments‘ expenditure. Design/methodology/approach Panel data analysis. A sample of 34 municipalities in Benin. Econometrics tests for the panel data models – estimation of the fixed-effect and random-effect models. Hausman test to identify the best model to explain the impact of the explanatory variables on local investments’ expenditures. Heteroskedasticity, normality and autocorrelation tests. Findings The results establish a positive and significant impact of own resources, state transfers and demographic variables on local investments’ expenses. Research limitations/implications As an implication, the results show the importance of local resources’ mobilization for the municipalities’ investment capacity building. They also show that the central government transfers continue to play a major place in local investments’ finance, even in a decentralization context. Limitation: Available data do not allow to well evaluate the impact of the electoral variable on municipalities’ investments’ expenditure. This situation does not allow to well analyze the public choice considerations in local authorities’ behaviors. Practical implications Local mobilization of financial resources must be encouraged to raise municipalities’ investments’ capacities. Strategies must be developed to reinforce local capacities in local resources mobilization. Social implications The results show the importance of local resources in local investments. They show the importance of citizens’ participation in their well-being construction, through local resource mobilization (ex: local fiscality). Originality/value Many authors assert in the literature that financial autonomy has a real impact on local development. However, empirically, it was not demonstrated. This paper contributes to correct this lack.
Local authorities in Madagascar do not have yet a budget simulation model. Budgetary rationalization makes it possible to effectively predict and manage budget implementation. However, the local finance budget is always based on an ex-ante situation without taking into account the economic, political, the behaviour of the elected official, the electoral cycle, and performance indicators. Therefore, a numerical simulation (use in many developed countries) from computer tools or the use of artificial intelligence or AI that can effectively predict a local finance budget. Predictive analyses help to better identify the fundamental characteristics of the budget elements, in order to model them and anticipate the executions as best as possible. Rather, it is a practice that relies on statistical tools, but also on the search for correlation and regressions that are methods used to discover functional models, connecting a variable to be explained and a set of explanatory variables. The prediction of a primitive budget then consists of using the different models from a simulation in Prex-B-developed software for the budget of local finances or decentralized territorial collectivities.