Проблематика роботи відповідає завданням адміністративної реформи, найважливішим результатом якої повинні бути докорінні зміни в управлінні територіальними громадами, пов’язані з отриманням нових можливостей розвитку й задоволенням потреб місцевих спільнот. Оскільки місцевий бюджет серед інститутів місцевих фінансів відіграє основну роль у забезпеченні виконання функцій і завдань місцевими органами, то упродовж останніх років було приділено багато уваги посиленню його впливу на економіку і соціальну сферу як інструменту фіскальної діяльності, забезпечення громадських послуг і економічного зростання. Ґрунтовнішого наукового осмислення та практичного вирішення потребують питання власних доходів місцевих бюджетів з позицій організаційно-структурних аспектів з метою забезпечення повноважень органів місцевого самоврядування вагомими джерелами фінансування. Питання фінансового забезпечення виконання органами місцевого самоврядування видаткових повноважень є особливо актуальним.
The formation of local self-government in the post-Soviet space takes place in difficult economic and political conditions under the influence of various, often directed in the opposite way, factors. For Russia, the experience of forming a new institution for all post-Soviet states is of significant practical importance since it faces many difficulties in its course. Within the framework of the invariant of the transition from centralized management to decentralization, the variant of this process in the Central Asian countries is more relevant for our country since it is carried out under conditions largely similar to those in Russia. In this regard, the purpose of this article is to highlight the key historical, economic and political factors of local self-government formation in the Central Asian states in order to deepen the understanding of the ways and possibilities of creating a sufficiently autonomous local level of public power in systems that have long operated within the framework of strict centralization and seek to form a new organizational structure and use new management mechanisms and tools to improve the efficiency of the process and achieve the main systemic goal of the modern state – improving the quality of life in the country. The relevance of the study of these processes is beyond doubt due to the need to understand the role and place of self-government in the structure of public power in accordance with the amendments made in 2020 to the Constitution of the Russian Federation. The study of options for local-level opportunities in a comparative perspective when analyzing public authorities in Central Asian countries also opens the way to new solutions to Russian problems.
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.
The subject of the study is the processes of budget decentralization in the management of public finances, as well as mathematical methods and models for implementing the concept of hard budget restrictions in order to create conditions for the self-development of administrative-territorial units. The aim of the study is to develop adaptive economic and mathematical models for implementing the strategy of hard budget constraints implemented in the process of inter-budget regulation. The relevance of the study is due to the fact that currently the subject of acute discussion in the scientific community is the self-development of administrative-territorial entities and increasing their financial independence. In this regard, the focus of economic research is focused on the problems of budgetary decentralization as an engine of economic development, as well as the related topics of the use of mathematical tools for modeling decision support in this area. The created models are subject to the requirements of learnability, adaptability to changing conditions of environmental influences, and the ability to operate not only with quantitative, but also with qualitatively defined characteristics. The problem of mathematical modeling is solved by applying an interdisciplinary synthesis of the theories of stochastic automata operating in random environments and fuzzy logic. The proposed synthesis of theoretical and methodological devices is the novelty of the research. As a result , an economic and mathematical model of a fuzzy automaton is constructed for determining and quantifying the values of the norms for the distribution of tax revenues between budgets of different levels of the budget system. A fuzzy automaton interacts with a simulation model that reproduces budget flows and quantifies the decisions made by the automaton model. The practical significance of the research results lies in the program implementation of the developed models and their inclusion in the public finance management circuit. In the future , it is planned to create a mathematical model of the collective behavior of fuzzy automata models, the interaction of which solves the problem of coordinating the interests of budgets of different levels of the hierarchy in the distribution of tax revenues.
The research is to prove that there was a fiscal illusion in district government spending in East Java in 2016-2018, and to prove that the fiscal illusion that occurred in government spending had an influence on the economic growth of each district. In fiscal decentralization in the era of regional autonomy, there is a phenomenon that each regional government still depends on financing activities from government transfer funds rather than receiving local revenue to finance regional expenditures. Even though government spending has increased every year, it is not in balance with economic growth. In this study it can be proven that there is a fiscal illusion in district government spending in East Java 2016-2018, this fiscal illusion affects the economic growth of each region. To increase economic growth and reduce regional unemployment rates, it is necessary to make efforts to increase capacity and fiscal independence as well as increase the labor force participation rate.Keywords: fiscal illusion, government spending, local government, economic growth, East Java.
China’s achievement of miraculous economic growth is a theoretical proposition that calls for an explanation. The key to understanding the logic of China’s economic reform is a rational explanation of the logical paradox between irregular local finance and the incentive compatibility of central and local governments. Based on the fact that autonomous local financial resources have long been dependent on irregular fiscal revenue, this paper constructs an inclusive public financial system analysis framework from the dual perspectives of the central and local government. This analytical framework offers an explanation of the long-standing implicit fiscal decentralization contract in which irregular fiscal revenue is the carrier in the reform process, together with a description of the central-local interaction process and institutional space underlying the behavioral motivations of central finance tolerance and local financial autonomy. It demonstrates the logical consistency of irregular fiscal revenue, central and local incentive compatibility, economic growth and market-oriented reform. The inclusive public finance system, which takes into account both local dynamism and central control, provides the important institutional logic that has enabled China to reach the dual goals of economic growth and market-oriented reform.
Mateus Ferreira de Almeida Lima, Francisco das Chagas Bezerra Neto, José Cândido da Silva Nóbrega, Auzenir de Oliveira Abrantes Monteiro · 6 authors
During the passage of time, it is necessary for a legal system to introduce structural reforms, given the maximum effectiveness of Law. And, among the main reforms proposed to the Brazilian order, there is the tax reform, represented, above all, by the PEC 45/2019. Several points are innovative, such as the adoption of the Value Added Tax (VAT) - renamed Tax on Goods and Services (IBS) - on consumer goods, in the three federal spheres, the basis of which comes from five other taxes: Tax on Industrialized Products ( IPI), Tax on Circulation of Goods and Services (ICMS), Tax on Services (ISS), Contribution to the Financing of Social Security (Cofins) and Social Integration Program (PIS); having specific rates for each federative entity and abolition of taxes such as the Tax on Financial Operations (IOF). However, would the creation or abolition of these taxes be positive or negative for the fiscal decentralization proposed in the 1988 Charter? An unsolvable dichotomy. Despite the selective rates for the three federative entities (Union, States and Municipalities), the Reform intends to create a central body, whose character would be to inspect such rates according to the total. There is, therefore, a paradox: between one and triune. Based on such affirmative assumptions, this article will have an exploratory character, with deduction as a method and data collection extracted from documents, bibliography and data taken from administrative bodies.
The purpose of this study is to determine the differences in the level of regional financial independence of the Trenggalek Regency Government for the period 2014-2016 and the period 2017-2019. This research uses comparative research. The type of data in this study is secondary data with documentation data collection techniques. The data source used is sourced from the Directorate General of Fiscal Balance's website at the Central and Regional Government Offices (DJPK). The data analysis technique used in this research is the descriptive analysis technique. The type of data in this study is secondary data with documentation data collection techniques. The results show that the ratio level of the degree of fiscal decentralization in Trenggalek was in a low category. It happened in the period 2014-2016 and the period 2017-2019. The value of regional financial dependency ratios is in the high category in the 2014-2016 and 2017-2019 periods. The value of the regional financial independence ratio is in the poor category in the 2014-2016 period, and the 2017-2019 period is in the low and medium category. The effectiveness ratio's value in the practical category in the 2014-2016 period and the 2017-2019 period.
The purpose of this research is to find out the effect of remaining more budget financing and fiscal decentralization on capital expenditure in districts/cities in the Region West Java period of 2015-2019. This research used secondary data in the form from Realized Local Government Budget obtained from Directorate General of Regional Fiscal Balance (DJPK).The population of this research is the report on government budget realization of districts/cities in West Java period of 2015-2019. All data is collected by sampling quota. The sample amounted to 105 financia report data. The analytical methods used in this research are the descriptive and statistic method of regression analysis of data panels including testing of hypotheses through F test, t-test and coefficient of determination (R2). The test model selection in this research is Fixed Effect. Based on the results of this research shows that remaining more budget financing and fiscal decentralization are simultaneously affecting capital expenditure. Partial remaining more budget financing variables and fiscal decentralization have a positive and significant impact on capital expenditure.Keywords: Remaining More Budget Financing, Fiscal Decentralization, , Capital Expenditure.
The last few years have been ones of intense debate in the Brazilian National Congress about the Basic Education Fund (Fundeb) seeking ways for this temporary mechanism to become permanent and improved. Debates on privatization of education and on tax justice are key elements in these discussions. This article sets out to analyze discussions around the amount of financing for Fundeb, funding sources, federal decentralization, and privatization proposals, presenting the active interest groups advocating on different sides of the agenda.
Ensuring the social welfare of societies is closely related to the type and manner in which governments use fiscal policies. In this regard, the main purpose of this study is to investigate the effects of fiscaldecentralization (income and expenditure) on social welfare. For this purpose, based on 30 provinces of Iran data’s during the 2005-2017 period, first the variables affecting welfare have been identified and the social welfare index for the provinces has been calculated, then the effects of decentralization have been investigated using the generalized method of movements for Income and expenses on the welfare index. The results of the model estimations, indicate a direct relationship between income and expenditure decentralization with social welfare, but with further increase in decentralization, this relationship has become negative and this indicates the instability of the fiscal situation in improving social welfare and has led to further increase in decentralization, this relationship becomes negative. Therefore, increasing decentralization and delegating more development projects to the provinces does not increase welfare, but also, first the necessary infrastructure for delegating affairs to the provinces, the power of self-government of the provinces should be evaluated, then with independence in Finance, we should expect the realization and improvement of social welfare in the provinces.
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.
Public administration reform is one of the main elements of structural reforms in the public sector, in an effort to achieve long-term sustainability of public finance and establish a sound business environment and to increase the quality and efficiency of the public services to the citizens.Public Administration Reform is a very broad concept a very comprehensive and include process changes in areas such as organizational structures, decentralization, personnel management, public finance, results-based management, regulatory reforms, revision of the civil service statute ect. Decentralization is a very important element of the Public Administration Reform as a whole and have a high importance in the entire process. Because of this importance and the big complexity of the issue in this paper I will analyze only the decentralization and local government reform as part of Public Administration Reform. All other pillars that represent Public Administration Reform needs also a special and deep analyze as well. From the mid-1980s onwards, a wave of decentralization reforms swept across the developing world, aimed at transferring responsibilities, resources and authority from higher to lower levels of government. In April 1996, the United Nations General Assembly, at its resumed 50th session, adopted resolution 50/225 on Public Administration and Development. The resolution confirmed the vital importance of strengthening public administration. Decentralization of governance is an important part of the process. Decentralization and local governance are recognized as basic components of democratic governance as providing the enabling environment in which decision-making and service delivery can be brought closer to local people and a very important piller of Public Administration. Decentralized governance is commonly regarded as a process of transferring powers, functions, responsibilities, and resources from central to local government and other entities on local level. From the organizational point of view, it is a process of restructuring of authority, so that there is a system of co-responsibility between institutions of governance at the central, regional and local levels, thus increasing the overall quality and effectiveness of the system of governance, while increasing the authority and capacities of sub-national levels. Decentralized governance provides the legal, administrative and fiscal frameworks for the empowerment of people and their institutions at sub-national levels, from regional to local.The Millennium Declaration, upon which the Millennium Goals are based, recognizes democratic governance, of which public administration is a key component, as central to the achievement of these goals.Each country followed its own trajectory related to historic legacies, geographic features, political factors, and prevailing socio-economic conditions and culture. This paper presents the characteristics of Public Administration and Local Government Reforms in Albania and North Macedonia (all countries of Western Balkan) in Post-Communist Era. In Western Balkan, part of the former Soviet Union, decentralization has been part of the political and economic transformation process, after 1989/1990 from a socialist system to a market economy and had to cope with three fundamental transformations; from a centrally planned state economy to a private market economy; from authoritarian centralized rule to a pluralist democracy; and from party and state-dominated societal organization to a relatively autonomous civil society. Additionally this countries face two development challenges: first, emerged from a decade of conflict and crisis, which influenced the economic, social and political life and structures and second, delayed transition from their socialist systems presents specific significant needs regarding reforms in their economies and public administration. The methodology used is the descriptive one as well as, analyze and comparative, based on secondary empirical data. The conclusion of this paper is that during the last years it is evident a visible progress regarding local government decentralization reform in counties analyzed. This progress has also positively affected their membership status towards EU. But the progress made so far has been slow and is still far from real decentralization parameters. Burdened with ethnic and nationalist conflicts the decentralization reforms are characterized by fragmented structures with unclear division of levels and powers, and non-existent accountability mechanisms.
This study theoretically and empirically analyzes the relationship between decentralization and welfare. The model identifies conditions in which a decentralized government is utility-maximizing compared to a centralized one. The empirical analysis utilized data from Philippine provinces to study the relationship between several decentralization indicators and welfare, as measured by per capita income, human development index, and poverty. Results suggest that fiscal independence, or the ability of local governments to generate their own revenues to finance their own expenditures rather than relying on central government transfers, is positively associated with per capita income and HDI. Moreover, this relationship is stronger when governance is better and weaker among lower-income provinces. In contrast, a higher number of local government units per population is linked to adverse development outcomes, and this association is stronger among lower-income provinces and weaker among those with good governance.
본 연구는 현 정부의 재정분권이 지역문화재정에 부정적 영향을 줄 수 있다는 문제의식에 근거하여, 포괄적 재정이양이 지역문화재정에 미치는 영향을 분석하였다. 이를 위해 먼저, 지방분관과 재정분권의 의의를 살펴보고 우리나라 재정분권 추진현황을 기술하였다. 다음으로, 문화분권의 의의와 지역문화재정 현황을 분석하였다. 마지막으로 재정분권에 따른 지역문화재정의 3가지 핵심 쟁점을 분석하였다. 첫째, 문화 분야는 다른 분야보다 지역에 기반을 두는 특성이 상대적으로 강하기 때문에 문화자치가 매우 중요함에도 불구하고, 현 정부의 지역문화재원 확보방안은 구체성과 실현가능성이 미흡한 것으로 나타났다. 따라서 지역문화만을 목적으로 하는 포괄보조금의 신설에 대한 검토가 필요하다. 둘째, 지방세 중심의 재정분권이 지역문화재정을 축소를 가져온 것은 아닌 것으로 분석되었다. 광역과 기초에서 문화예산, 문화예술예산, 공연예술예산 총액은 지속적으로 증가하였으며, 비중도 광역의 경우 지속적으로 증가하는 것으로 분석되었다. 기초의 경우에도 전체 예산에서 문화 관련 예산의 비중이 현상 유지 내지는 증가하는 것으로 나타났다. 주민참여예산제가 전체 지자체로 확대되고 운영의 활성화된다면 지역주민의 선호도가 많은 문화사업에 대한 재원이 확대될 수 있을 것이다. 셋째, 지자체별 문화 예산의 편차와 1인당 문화 관련 예산의 지자체 유형별 편차가 큰 것으로 나타났다. 따라서 재정분권은 지자체간 문화투자 격차를 악화시킬 우려가 있다. 따라서 지역 간 문화 불균형 문제를 해소하기 위해서 문화적 낙후지역에 예산을 지원하는 프랑스의 특별문화교부세(Dotation culturelle spéciale), 영국의 문화발전기금(Cultural Development Fund)의 활용 가능성을 모색할 필요가 있다.
The article deals with economic and statistical research on the latest trends in local budget’s revenues caused by the decentralization reform, as well as the identification of its key problems, such as: significant differentiation in the regions’ fiscal capacity, arising due to a number of factors (social, geographical, resource, legislative ones); the regions’ dependence on central authorities due to the lack of effective mechanisms for devolution, hampering the efficiency and reducing the expediency of delegating certain functions; the insufficient level of the regions’ fiscal capacity; and finally, finding the ways of solving the abovementioned problems. These problems can be solved by creating conditions for increasing the local budgets’ own revenues in the face of limited budget funds. The state regional policy, having been carried out for decades, has created the regions’ deep dependence on the center and their lack of incentives to develop on their own by designing mechanisms to use the potential of Ukraine’s regions effectively. The recent decentralization policy is aimed at eliminating these negative trends. The success of this policy can only be ensured by improving and reforming the local government financing system. Local budgets are the main tool by which local authorities implement the program of social and economic development of a region. But at present, the mechanism of local budget formation is inefficient. This statement can be confirmed by the fact that the amount of financial assets in the local budget is insufficient to conduct an independent program of social and economic development. The structure and composition of local budget revenues have been studied on the basis of statistical information, their impact on the social and economic development of Ukraine’s regions has been determined. The research allows to conclude that successful implementation of the decentralization policy requires an individual approach to the formation of each administrative and territorial unit, a thorough study of economic sufficiency and independence of this unit, as well as research on social and economic development of this unit, as a whole.
Abstract A key challenge for democratizing local government is the extent to which local policy is responsive and accountable to local voters’ preferences. The goal of this paper is to assess the potential relevance of this thesis in the case of the Islamic Republic of Iran (IRI) by focusing on the fiscal dimensions of elected local government first established in 1999. In this paper, I present descriptive data and empirical analysis to provide a comprehensive picture of fiscal decentralization and municipal finances under the IRI, which up till now has been a “black box.” To peer inside, I present the results of a unique dataset on almost ninety cities gathered over an eight‐year period covering the first phase of decentralization (1998–2006). I find that elected municipalities in Iran possess limited fiscal and legal autonomy on both the revenue and expenditure sides. The findings provide support for the broader thesis that the structure of local government finance has acted to thwart the Islamic reformists’ project of local democratization and strengthening local government accountability.
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.
The main focus of this paper is to analyze the effect of local public finance on spatial land use through economic models and empirical evidence from Israel. The theoretic models extends the Alonso-Mill-Muth model by incorporating local public finance. The first finding is that steady population growth provides a channel for land capitalization through the mechanism of long term land property right. This implies a possible conflict of interest if ownership of land leasing revenue and the ad valorem property tax are not consistent. The empirical section examines one of the implications derived from the models highlighting a possible inconsistency between central and local governments due to land ownership centralization. This causes local tax revenue inequality among Israeli municipalities. Statistical evidence shows that cities with a larger share business land use can generate more tax without assistance from the central government, and are therefore more fiscal independent. Fiscal status has a significant effect on the planning time of residential construction. Municipalities with higher local tax revenues have shorter planning time(higher probability of acceptance) conditional on the plan’s size and other features.
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.
In river systems, costly upstream pollution abatement creates downstream welfare gains. Absent adequate agreement on how to share the gains, upstream regions lack incentives to reduce pollution levels. We develop a model that makes explicit the impact of water quality on production benefits and suggest a solution for sharing the gains of optimal pollution abatement, namely the Shapley value of an underlying convex cooperative game. We provide a decentralized implementation through a smart contract to automate negotiations and payments. In effect, it ensures a socially optimal agreement supported by fair compensations to regions that turn to cleaner production from those that pollute.
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.
Each chapter of this thesis investigates one aspect of China’s taxation system. Chapter 1 investigates the introduction of accelerated depreciation (AD) for fixed assets investment in China as a natural experiment. In contrast to the large positive impact of similar tax incentives in the U.S. and U.K. found in recent studies, we document that AD was ineffective in stimulating Chinese firms' investment and that firms fail to claim AD on over 80% of eligible investments. We investigate information frictions as the primary driver of both facts. Chapter 2 documents new facts about the structure and drivers of China’s SI contributory base, with an emphasis on non-compliance. First, 54% of firms do not pay into the employer-based SI system leaving 35% of employees outside of SI coverage. Among participating firms, an estimated 85% of firms are not fully compliant. Second, compliance increases sharply with firm size. Third, China is unique in that SI administration and insurance pooling are done at sub-provincial levels. We investigate how this decentralization contributes to firm non-compliance. Chapter 3 applies the lessons from Chapter 2 to analyze China's primary fiscal response to the Covid-19 crisis: an exemption for firms from making SI contributions, resulting in an average tax cut of 21 percentage points on employment. Labor informality substantially reduces the reach of this fiscal response and skews the tax savings towards large firms. Offsetting this negative targeting is the much higher labor intensity of the firms most vulnerable and exposed to the economic shock, which creates a larger benefit from payroll tax cuts for these firms. Chapter 4 studies the transition from a turnover tax (TT) to a value-added tax (VAT). This reform, the largest Chinese tax reform in a quarter-century, mostly eliminated the taxation of firm inputs. We assess the effects on production, investment, and outsourcing. We find minimal effects on firm output but large increases in fixed asset investment. The latter is driven by an effective 17 percentage point reduction in the tax rate on fixed asset purchases. We also find mixed evidence on whether outsourcing increased due to the reform.