Educational systems around the world have undergone major reforms since the 1980s, with largely disappointing results. The objective of this paper is to understand the reasons behind the lackluster results with the purpose of devising ways to address them. Analysis in the paper is based on the understanding that the education sector is characterized by distinct functional imperatives that need to be addressed in policy responses that must involve a wide array of actors to be effective. In this view, education policy is fundamentally about establishing a governance structure to ensure that all the essential functions necessary to achieve the chosen policy goals are performed. Accordingly, the paper proposes a governance framework for education comprising political and operational functions, which it then applies to education policy reforms in the Philippines since the 1970s. The analysis finds that the reforms have focused on financing and decentralization issues while overlooking many other critical governance functions. The lackluster results are unsurprising given that the sector has been beset by many problems unrelated to centralized bureaucratic administration and which have been left unattended. The conclusions regarding the importance of comprehensive governance to emerge from this study are relevant not only for understanding education policy reforms in the Philippines and elsewhere but will also help develop a fuller understanding of the functioning of the education sector in general.
Decentralization and fiscal decentralization constitute one of the most followed trends for political and economic reform in recent years around the world. Albania, in the 1990s, begins its process of transitioning from a centralized economy to a free-market economy. This process is accompanied by transforming existing economic mechanisms and infrastructure to better function the free-markets model, but above all, with the need to develop and create new legal, institutional, economic, and social instruments and spaces to increase the allocation and efficiency of public and private resources. The objective of this study is to give an appropriate answer to the question: What has been the impact of decentralization reforms on the performance of public services provided by local government? The research paper will focus on the role that improvements and legislative changes play in the country's economic growth. Within the past two decades, progress is made in advancing decentralization reform, but there are still many challenges ahead, such as the lack of a clear legal and regulatory framework. Adding to that concern is the financial autonomy of local governments, which remains a challenge for the future. The research methodology used will be a descriptive analysis of data obtained from the Ministry of Finance and Economy and local municipalities on the impact of the reforms. Recommendations and suggestions will be given on the reforming process, as well as ways to increase the efficiency of local government units.
Abstract Why do common-pool problems persist over time in federations? The literature shows that macro institutional, economic, and political incentives facilitate bailouts through intergovernmental transfers and debt management. Little research, however, explores the legislative mechanisms that prevent common-pool problems from being effectively addressed. This article focuses on a most central mechanism: tax lawmaking. We argue that lawmakers, whose careers rest in the hands of provincial constituencies, administer the legislative process to promote bills that protect the federal transfers that finance vertical fiscal imbalances and to amend proposals that seek to change them. Using an expert-coded dataset designed to assess the direction and magnitude of tax policy change, as described by the amendments proposed by legislators to the full set of tax bills proposed to the Argentine Congress since 1983, we document the legislative dynamics underpinning the common-pool problems of decentralized fiscal federal arrangements.
Lisa Grazzini, Patrizia Lattarulo, Marika Macchi, Alessandro Petretto
The aim of this paper is to analyse the requests of asymmetric decentralization that have been recently proposed in Italy by Lombardy, Veneto and Emilia-Romagna in light of the tiny economic literature on asymmetric federalism, and the current institutional set-up. On the basis of article 116, paragraph 3 of the Italian Constitution, we retrace the steps that have been made up to now: from the three original regional requests to the Preliminary Agreements signed in February 2018, and the following Preliminary Agreements signed in February 2019. Attention is focused on three of the subject matters for which a higher degree of decentralization has been requested: health, education, and public finance and regional fiscal coordination. We then analyse the types of funding which could be given to regions to finance their additional supply of goods and services by focusing on three specific criteria: historical costs, national average costs, and regional government expenditure standard needs.
In connection with the expiration, in 2020, of basic regulatory and legal acts coordinating the implementation of the decentralization, it is needed to actualize and determine further directions of reform of the public finance management system. The purpose of the article is to determine efficient methods and directions of further improvement of the financial equalization system in Ukraine in order to form progressive local budget resource model, which by more balanced socio-economic development of municipalities will meet the needs of the population. The article addresses the essence and main components of financial equalization as a tool of budget regulation. The contents of the fiscal imbalance, horizontal and vertical equalization, evolution of methods of removal of fiscal disparities are highlighted. A European approach to overcoming the effects of the unequal distribution of potential sources of the financing of expenditures of bodies of local self-government is characterized. Features and invariance of reform of the public finance management system on the basis of decentralization, renewal of the financial equalization mechanism are considered. As a result of research, the effects (achievements and shortcomings) of the functioning of tools of vertical and horizontal equalization in the budget system of Ukraine implemented as a result of reform of fiscal decentralization, are analyzed. Basic recommendations aimed at further strengthening and establishing a stable local budgets base being a foundation for the whole budget system and a financial basis for local self-government, are proposed, on the strategy of improving the financial equalization mechanism that will provide achieving a balance of the interests of all participants in inter-budgetary relations.
This paper aims to measure the degree of fiscal decentralization in Jordan by estimating the indicators used by the World Bank and the International Monetary Fund. These are the share of local units in public revenues, the share of public spending, and the share of compensation for workers in local units from the total compensation of workers in the public sector. The study uses set of data about public revenues and expenditures of the central government, independent government units, as well as the municipalities’ budgets figures. These data are for the period 2016-2018 and published electronically by the Ministry of Finance and the Ministry of Local Administration in Jordan. The study revealed progress in the field of political and administrative decentralization represented in the establishment of elected councils at the national, regional, and municipal levels and the transfer of a number of powers from central authorities to regional or local bodies. The issuance of a new decentralization law and the amendment of the Municipalities Law in 2015. The results showed that the degree of fiscal decentralization is very low in Jordan, especially when compared to other countries that had implemented decentralization reforms.
INTRODUCTION: Fiscal federalism and fiscal decentralization are distinct policy options in public services in general and healthcare in particular, with possibly opposed effects on equity, effectiveness, and efficiency. However, the pertinent discourse often reflects confusion between the concepts or conflation thereof. METHODS: This paper performs a narrative review of theoretical literature on decentralization. The study offers clear definitions of the concepts of fiscal federalism and fiscal decentralization and provides an overview of the potential implications of each policy for healthcare systems. RESULTS: The interpretation of the literature identified three different dimensions of decentralization: political, administrative, economic. Economic decentralization can be further implemented through two different policy options: fiscal federalism and fiscal decentralization. Fiscal federalism is the transfer of spending authority of a centrally pooled public health budget to local governments or authorities. Countries like the UK, Cuba, Denmark, and Brazil mostly rely on fiscal federalism mechanisms for healthcare financing. Fiscal decentralization consists of transferring both pooling and spending responsibilities from the central government to local authorities. Contrarily to fiscal federalism, the implementation of fiscal decentralization requires as a precondition the fragmentation of the national pool into many local pools. The restructuring of the pooling system may limit the cross-subsidization effect between high- and low-income groups and areas that a central pool guarantees; thus, severely affecting local equality and equity. With the limited availability of local public resources in poorer regions, the quality of services drops, increasing the disparity gap between areas. Evidence from Italy, Spain, China, and Ivory Coast -countries with a strong fiscal decentralization element in their healthcare services- suggests that fiscal decentralization has positive effects on the infant mortality rate. However, it decreases healthcare resources as well as access to services, fostering spatial inequities. CONCLUSION: If public resources are and remain adequate, allocation follows equitable criteria, and local communities are involved in the decision-making debate, fiscal federalism -rather than fiscal decentralization- appear to be an adequate policy option to improve the healthcare services and population's health nationwide and achieve health sector economic decentralization. HIPPOKRATIA 2020, 24(3): 107-113.
Richard Bluhm, Andreas Fuchs, Austin Strange, Axel Dreher · 6 authors
This paper studies the causal effect of transport infrastructure on the spatial distribution of economic activity within subnational regions across a large number of developing countries. To do so, we introduce a new global dataset of geolocated Chinese grant- and loan-financed development projects from 2000 to 2014 and combine it with measures of spatial concentration based on remotely sensed data. We find that Chinese-financed transportation projects decentralize economic activity within regions, as measured by a spatial Gini coefficient , by 2.2 percentage points. The treatment effects are particularly strong in regions that are less developed, more urbanized, and located closer to cities.
Objective – Changes in financial authority as a result of decentralization are expected to make provinces in Indonesia become more flexible in approving their finances. However, it goes beyond central government transfers which make local governments more consumptive, which impacts on the phenomenon of the effect of flypaper. This study aims to identify the influence of the government’s fiscal on regional expenditure and identify the effect of flypaper on the regional expenditure in Kalimantan. Methodology/Technique – The research uses panel data from 56 regencies and cities on Kalimantan Island. Pooled least square method is used. Findings – The results show that intergovernmental fiscal revenue has a significant relationship with expenditure. Further, the flypaper effect occurs in regional expenditure which means that districts and cities in Kalimantan are still dependent on the central government to finance regional expenditures. They are not able to maximize their respective regional income. Novelty – These results indicate that the existence of local revenue derived from taxes has not been able to be optimally absorbed. Thus, dependence on intergovernmental transfers is very high. In addition, the flypaper effect also indicated that the intervention of the central government came into regional development planning programs. Type of Paper: Empirical Keywords: Flypaper Effect; Intergovernmental Transfer; Fiscal; Grants. Reference to this paper should be made as follows: Yacoub, Y; Lestari, N. 2019. Flypaper Effect in Indonesia: The Case of Kalimantan, J. Fin. Bank. Review, 4 (4): 116 – 121 https://doi.org/10.35609/jfbr.2019.4.4(1) JEL Classification: B22, D02, H02, H21, H3.
Fiscal decentralization is a policy made by the government to reduce fiscal dependence on the central government and create financial independence in the region. The independence of regional finance itself can be reflected through the high percentage of PAD revenue to total regional revenues. Where the existence of regional financial independence is expected to help implement regional development that can affect economic growth in the region. The purpose of this study was to determine the relationship of the level of regional financial independence to economic growth of districts/cities in East Nusa Tenggara Province in 2012-2017. The results of study uses secondary data analysis tools to approach the data panel Fixed Effect Model (FEM). The results of this study indicate that the local revenue had significant positive effect on economic growth, equalization funds had no significant positive effect on economic growth.
The aim research (1) to know local financial performance with ratio of fiscal decentralization degree, local financial independent, effectiveness of PAD, local finance efficiencey and growth PAD regencies/municipalities in South Borneo province 2013-2017, (2) to know business sector which contributed in PDRB. Technical analysis data is descriptif analysis. The result research showed : by average fiscal decentralization degree ratio 9 regencies still very less and 4 regencies/cities less, 7 regencies low, average local financial independence 4 regencies still very low, 7 regencies low and 2 municipalities enough independence, average effectivene PAD ratio almost all of regencies/municipalities very effective except Banjarmasin municipality are effective, average local financial efficiency ratio 9 regencies/municipalities less effecient and 2 regencies enough efficient, while Banjarbaru municipalities inefficient, growth PAD ratio is positive. Keywords: fiscal decentralization degree ratio, local financial independence ratio, effectiveness of PAD ratio, local financial efficiency ratio, PAD growth ratio.
Bintoro Ariyanto, Abdul Aziz Ahmad, Suharno Suharno, Poppy Arsil
The implementation of fiscal decentralization in Indonesia has been running for 18 years, marked by the increase in the burden on local governments in carrying out it, and the fact that there are still many local government budgets used for personal expenditure. Nationally, there are still 151 regencies/municipalities out of 416 regencies/municipalities in Indonesia, which have more than 50% of the total regional revenue and expenditure budget. Many local governments rely on transfers of funds from the central government in carrying out the role of fiscal decentralization. The dependence of regional government is reflected in the size of the balancing budget used to finance fiscal decentralization, due to the limited revenue from original local government revenue. This paper aims to see do regencies/municipalities finance fiscal decentralization, what is the local revenue for each region and its relation to economic growth, and what is the employee expenditure allocated to each regional revenue and expenditure budget and its relationship with economic growth. This paper uses cross-tabulation analysis with variables of original local government revenue, the proportion of employee expenditure on regional revenue and expenditure budget, and economic growth in 35 regencies/municipalities in the Central Java region. Local income consists of local revenue, balanced budget, and other legitimate income. Regencies/municipalities consist of local taxes, retributions, the income of regional government corporate and management of separated regional government wealth, and other original local government revenue, while the balanced budget is in the form of tax share, no tax share, general allocation fund, and special allocation fund. Research in Central Java Province because it is a Province with the number of regencies/municipalities the second largest after East Java in Indonesia. The results of this study are that in the province of Central Java, there are still 30 regencies/municipalities (85,7%) whose balance funds exceed 50% of their APBD funds, in other words having very low PAD, and employee expenditure is still high. Transfer of funds from the central government to the regions has also not played a major role in driving economic growth. There are strong indications of the inability of local governments to carry out fiscal decentralization so that improvements are needed in the formulation of their policies. One way to increase local government original income is to diversify local taxes, but by paying attention to the situation and conditions of the region so that it does not harm the economy in general. It could also be by developing productive regional businesses while still prioritizing public services. Besides, the government can also carry out efficiency in running its government, for example by training employees and not increasing the number of employees over the next few years. Keywords: 1 Fiscal Decentralization · 2 Economic Growth · 3 Original Local Government Revenue · 4 Personal Expenditure · 5 Regional Revenue · 6 Expenditure Budget
Nadiya Dubrovina, Erika Neubauerová, Michal Fabuš, Оксана Тулай
Nowadays the problems of optimal taxation and tax distribution are closely connected with growth of decentralization and democracy in the world, especially in EU and other countries, such as USA, Canada, etc. Many economists and analysts studied the problems of co-operation between central and local administration in the realization of the state programmes and efficiency of public services on different levels (central, regional or local). Due to the theoretical and empirical evidence it was clear that some functions of public administration on the central level are not carried out efficiently and some competences of public administration can be transferred to the local levels. Thus, the problems of competences and public finance distribution between central level (state) and other levels (regional or local) are the main aspects to discuss in the theories of fiscal federalism and fiscal decentralization. In the theory of fiscal federalism the problem of taxes allocation between different levels of government is considered to be one of important tools for realization of stabilization and allocation functions of public finance. It should be noted that one of the theoretical and research problems is how to evaluate the measure for financial decentralization. There are different approaches to this problem in modern research such as qualitative (for example, grouping countries based on some qualitative criteria or experts’ evaluation of reforms focuse on financial decentralization) or quantitative ( a set of different ratios, geometric mean of different indicators, aggregated index, etc.). The purpose of the research is to obtain the aggregated indicators for evaluation of public finance distribution on central and local levels and to analyze the balance between these indicators for EU countries. For our research we used the idea of aggregated indicator to evaluate the measure of dependence upon central government expenditure and measure of local autonomy development. Due to the methodology for calculation of aggregated index proposed by Helwig the value of the aggregated index is varied from 0 to 1, or from minimal possible level to maximum possible level of the generalized characteristics described by the original set of indicators. Thus, if measure of public finance dependence upon central government Int_C is more closed to 1, then central government plays a greater role in expenditure for public finance. If measure of local autonomy Int_L is more closed to 1, then local government has more opportunities in their revenue and expenditure. It should be noted that for the balanced position of the country on the plot the values of the Int_C and Int_L should be equal to or lie on 45 degree line. If the bundles lie upper 45 degree line it means that level of local autonomy is more expressed, and vice versa, if the bundles lie lower 45 degree line it means that level of local autonomy is less expressed. The aggregated indices Int_C and Int_L were calculated for EU countries during the period of 2002–2017 and it makes possible to evaluate the features of national fiscal policy in balance between distribution of funds for central and local levels.
National economic growth is an aggregation of regional economic growth. Growth is also the main measure of development success. The existence of fiscal decentralization provides flexibility to local governments in regulating their regions and making policies that can support the potentials in their regions. This study aims to analyze and provide empirical evidence about the determinants of economic growth in 38 regencies/cities in East Java Province in 2010 to 2016 including Locally-generated Revenues (PAD), General Allocation Funds (DAU), Special Allocation Funds (DAK), Revenue Sharing Funds (DBH), Indirect Expenditures, Direct Expenditure, and Remaining Over Budget Financing (SiLPA). From the results of the Fixed Effect model, it was found that the PAD, DAU, DBH and Direct Expenditure had a positive significant effect on economic growth, while the DAK and Indirect Spending variable had no significant effect on economic growth. SiLPA also had no significant effect on economic growth. The last, simultaneously, PAD, DAU, DAK, DBH, Direct Expenditure, Indirect Expenditure and SiLPA had a significant effect on economic growth.
The article probes into factors that determine processes of decentralization in managing the general education system. The study entails a review of pertinent literature and an analysis of the distribution of powers among entities managing the general education system based on the European countries' experience. The study concludes that the education management system in the most EU-countries is decentralized or gradually being decentralized and de-concentrated on the basis of the subsidiarity principle. The results of our research give the possibility to affirm that the successful implementation of the decentralization reform requires the following two conditions: political support for proposed changes and the ability of those charged with carrying out the reform. An analysis of literature confirms that decentralization as a process is also a function of factors other than political will and capacity. These factors include trust (the extent of decentralization depends on the central government’s trust in the local government, and vice versa), financial troubles, path dances, international developments, etc. An analysis of the distribution of decision making powers in areas of financing and human resources demonstrates that there is a trend towards decentralization, albeit inconsistent due to obstacles on the level of centralized management. The article maintains that there has to be an adequate balance between centralization, which is necessary for the implementation of general national educational objectives, and decentralization, which allows teachers, schoolchildren, parents and the representatives of local communities to participate in education management.
The article presents partial results of a comparative research that aims to discuss federalism as a form of organization of the State and its repercussions for the organization and financing of basic education in Argentina and Brazil. Documentary analysis methodology was used and special attention was given to the legal documents that organize and regulate the federative relations in education and in the financing of education in both countries. As the main findings are the fact that the supply and financing of basic education are decentralized, under the marked responsibility of the subnational ones, although there are mechanisms of action of the national one in the financing of education, either by repairing resources or acting in a complementary way.
Local governments in China faced a mismatch between fiscal revenue and expenditure responsibilities after tax sharing reform in 1994. Governments are not only suppliers of public goods, but also monopolists of the primary market of land, operating land assets through land transfer, and land mortgage to increase extra budgetary fiscal revenue. Relevant research and empirical evidence found that local governments tend to break the balance of public goods supply when pursuing the growth of land revenues, and they excessively increased economic construction expenditures and weakened investment in social security and general public expenditure. However, through the empirical analysis of panel data of 30 provincial capital cities in China from 2007 to 2015, we found that these cities tend to improve the overall public service environment in the region through land financing, thus continuously improving their relative competitive advantages.
In this article, we lay out the results of an analysis of the role of property tax regime in the local finance of Kosovo and highlight the current advantages and weaknesses. Design/Methodology/Approach: We do this by carrying out an analysis of the legislation in force, which regulates financial issues at the central and local levels, the functioning of property tax, and other financial implications for municipalities. In doing this we review the level of dependence of municipalities on central government, grants and their share, as well as other issues which have an impact on fiscal decentralization. We also analyse tax system and its evolution, the participation of tax categories and municipality tax in central and local budgets and give specific accentuation to property taxation, role in the taxation system and local finances. Moreover, we present the institutional structures and their competencies, relationship between central and local institutions. Findings: The current situation and system in place leaves much to be desired and property taxes may have more potential as a revenue source for municipalities. Practical Implications: This article shows the importance for municipalities to find a means to self-finance through their own sources. Originality/Value: We define needs for strengthening the Own Source Revenues (OSR), taking strong and coordinated steps to improve the management and collection of OSRs in general and property tax in particular.
Discusses the need for city government self-assessment, explains the objectives and rationale for Local Governments Self-Assessments (LGSAs); and describes the process and methodology used. Reducing the gap between citizens and the level of government responsible for service provision will lead to greater efficiency in the use of resources, and over recent decades, many countries have devolved a growing list of expenditure responsibilities to local governments, but often without corresponding decentralization of resources to finance them. The seed for the LGSAs started in the 1990s, when the World Bank, between 1993 and 2003, financed about 50 urban development projects in the cities of Sub-Saharan Africa. A new generation of municipal audits launched in the 2010s led to capacity-building programs for municipalities in Southeast Europe. A successful LGSA requires political will and buy-in from key stakeholders, including (1) mayors and city managers; (2) key municipal departments; (3) central ministries; and (4) associations of local governments.
We exploit the public good attributes of information and communication technologies (ICTs) and theoretically analyze an aggregate economy of two smart cities in which ICTs are provided in either a decentralized or a centralized manner. We first determine the efficient ICT levels that maximize the aggregate surplus from the provision of ICTs in the two cities. Second, we compute the optimal level of ICT provision in the two cities in a decentralized regime in which spending on the ICTs is financed by a uniform tax on the city residents. Third, we ascertain the optimal level of ICT provision in the two cities in a centralized regime subject to equal provision of ICTs and cost sharing. Fourth, we show that if the two cities have the same preference for ICTs then centralization is preferable to decentralization as long as there is a spillover from the provision of ICTs. Finally, we show that if the two cities have dissimilar preferences for ICTs then centralization is preferable to decentralization as long as the spillover exceeds a certain threshold.
A mainstream motivation for decentralized government is to enable public service investments to better align with political preferences that may differ by geographical region. This paper examines how political preferences determine local government provision of hospital services. We find that local governments in areas more supportive of public insurance expansion responded to such state action by increasing expenditures on hospitals, whereas those in areas that voted against such expansions used the savings to reduce property taxes. This finding suggests that local government financial responses indeed align with political preferences.
Cinzia Di Novi, Massimiliano Piacenza, Silvana Robone, Gilberto Turati
Recent theories on fiscal decentralization support the view that sub-national governments who finance a larger share of their spending with taxes raised locally by themselves are more accountable towards their citizens. Whilst evidence on improvements in spending efficiency is relatively common, little is known about the effects on inequalities amongst the population. In this paper we exploit a reform aimed at increasing regional tax autonomy in Italy to provide quasi-experimental evidence on the impact of fiscal decentralization on health disparities between- and within-regions. Our findings, robust to a number of robustness checks, support the view that fiscal decentralization does not impact on between-regional inequalities but can help to reduce inequalities within regions. However, this last effect depends on the degree of economic development: richer regions are better than poorer ones in containing inequalities.
The aim of this study is to focus on fiscal decentralization and regional financial autonomy in Slovakia. The public administration reform and fiscal decentralization process in Slovakia ought to increase the autonomy of the multi-level governance and to decrease its dependency on state budgeting and other transfers. We argue that regional territorial governance is greatly dependent on financial incentives from central state financing, which limits the expected effect of decentralization and regional fiscal autonomy. By collecting quantitative data on state transfers and revenues to regional governments we demonstrate the limits of spatial, financial and decision-making autonomy within particular regions. The selected time frame 2005-2016 reflects all stages, reforms and changes in the fiscal decentralization of the second level governance in Slovakia.