This paper critically accounts for why fiscal decentralization does not necessarily enhance revenue autonomy in the experience of Taiwan, as local governments do not pursue it. This experience is especially relevant to unitary countries that are undergoing both democratization and fiscal decentralization. This paper shows that, with inter‐jurisdictional competition, democratically elected local governments are inclined to pursue tax harmonization and have little incentive to maximize taxing powers even though doing so increases own‐source revenues. The local governments in Taiwan take a ‘mini‐max’ fiscal strategy, which involves minimizing changes to own‐source revenues while maximizing local expenditures. To finance increasing expenditures as a response to the demands of constituencies, local governments tend to press the central government to increase local government's tax bases, and to try to gain a greater share of intergovernmental transfers by having their administrative status upgraded. In summary, revenue autonomy is not being pursued by local governments because of political considerations. In a decentralized fiscal system, local governments can be fiscally accountable, but still irresponsible .
Alina Florentina Cucos, Кукош, А., Trif, N., Триф, Н. · 5 authors
Water supply and sewerage services represent utilities that must be provided to all users, both the urban and the rural. The responsibility to ensure these services in terms of non-discrimination and affordability belongs to the local authorities, which in the spirit of decentralization have exclusive jurisdiction on their establishment, organization and operation. Regardless of the chosen management, the funding of water supply and sewerage services, is accomplished by means of the prices and tariffs paid by the users. Their quantum, specific to some social services, covers the costs without allowing the accumulation of consistent profit margins, which would ensure the development of the specific infrastructure from the operators' own funds. It is therefore necessary that funding for the creation and rehabilitation of water supply and sewerage systems to be provided from other sources than the budgets of operators, such as: budgetary allocations of local public authorities, government or European funding programs. This paper is of interest because it captures just how the prices and tariffs for these services are composed, and the entire procedure for foundation, adjustment and modification that follows different rules from those of pricing in the market economy, and it provides a review of the types of programs through which the development of the specific technical-urban infrastructure and the significant increase in the number of users in the past 25 years.
This paper models the local tax mix determination process in the presence of statewide fiscal limitations—the decentralized government finance archetype—and shows how excess sensitivity of local public spending to grants (the conventionally and somewhat misleadingly termed “flypaper effect”) arises in the constrained tax mix irrespective of whether lower or upper limits bind and how it cannot, in general, be taken as a symptom of local government overspending. An empirical application to Italian province panel data provides consistent evidence of the role of corner solutions produced by two-sided tax limits in explaining the sensitivity of local public expenditures to grants.
Drawing on a set of financial and budget specific indicators, the paper examines the financial activities of local authorities, aiming at diagnosing local public financial management. In the context of the increasing decentralization of public finance, local authorities must demonstrate the ability to manage local resources as efficiently as possible, adopting decisions (including financial ones) to respond promptly to citizen needs. For this reason, we set out to present an analysis model aimed at accustoming local decision-makers with the specific tools and methods and assisting them in gaining awareness of the benefits of such analyses. Empirical research shows that local authorities, due to the low income generation capacity, face a shortage of own resources, creating dependency on the state budget. Moreover, it has been demonstrated that that lack of resources limits both the investment capacity and the decision-making autonomy of local authorities in prioritizing spending. The analysis conducted in terms of performance indicators has revealed low level of local government involvement in stimulating economic activity in the community under examination.
The paper deals with comparison of fiscal decentralization systems in EU-27 according to selected quantitative criteria and certain European Charter of Local Self-Government principles. The results of comparative analysis show that a higher number of lower levels of government usually indicate a greater share of local finance within the total public finance, however, this finding does not confirm the inverse link. Even though the structure of expenditures in EU-27 countries is quite similar, the shares of funds for the implementation of individual tasks and competencies differ significantly from country to country. On average, the countries allocate most funds to education, social security, healthcare, administration and political systems, with only a quarter of the countries recording the same or higher amounts of revenues than expenditures. Most of the countries still cover the existing deficit either through transfers from the central to lower levels of government or through equalisation schemes or borrowing, which otherwise represents a departure from one of the basic principles of the Charter, which stipulates that financial resources must be commensurate with the responsibilities of local self-government.
The decentralization process was continuous in Romania starting with 1990, generating the implication of local authorities in local public finance, as a result of exclusives, shared and delegate competences and, so, the necessity of ensuring a good management of resources and expenditures. Therefore, the decentralization of competences / responsibilities from State to local governments was a major Romanian political theme and a first rank component of management of local public finance, as main driving instrument for local development. Specific legal framework of local responsibilities is established both to European and national level. Researchers based on regulation and practice have tried to quantify the responsibilities developing different models to measure local revenue and expenditures autonomy. The paper aims is to identify some models for measuring local expenditure autonomy and to apply for Romania. The study is oriented to measure local expenditure autonomy in Romania using Bell, Ebel, Kaiser and Rojchaichainthorn's model.
Christopher Zegras, Joshua Nelson, Rosàrio Macário, Christopher Grillo
Fiscal federalism refers to the attribution of public finance functions among different levels of government. We examine Portugal's metropolitan transportation sector through the fiscal federalist lens, in light of the country's decentralization efforts and new relevant legislation. We clarify basic principles of fiscal federalism and adapt them to the finance of metropolitan transportation systems – typically characterized by multiple jurisdictions, numerous externalities and equity concerns – showing the inadequacy of general practice. Portugal's overall public finance system partially adheres to fiscal federalist principles; the transportation sector less so. Metropolitan transportation faces particular troubles, with few direct user fees, prices inadequately reflecting costs, and heavy reliance on central government subsidies for public transportation investments and operations. A new law creating metropolitan transportation authorities is only modestly consistent with fiscal federalist principles, since it inadequately details financial responsibilities and remains under heavy central government control. Absent additional reforms, the new metropolitan authorities should aim to make the transportation finance system explicit and test incentive grants to induce inter-municipal cooperation.
This study is the first attempt to examine the determinants of expenditure decentralization at sub-provincial levels in China. The Chinese central government gives detailed guidelines to local governments on public finance, but, ironically, their expenditure assignment is far from being well-regulated. Differences in fiscal decentralization on the expenditure side are enormous among local governments. Employing a panel dataset of 1995–2006, we provide empirical evidence that transfer dependency negatively affects expenditure decentralization in Chinese local governments. It suggests that intermediate governments, i.e., provincial governments, may have “grabbed” central grants for self-interests.
Gover Barja Daza, Sergio Villarroel Böhrt, David Zavaleta Castellón
The second generation fiscal federalism (sGff) approach is used as a reference to analyze the political and fiscal institutional design of Bolivia’s decentralization model and its evolution. subnational public finance data up to 2008 is used to verify that decentralization of expenditure was higher than that of revenue, establishing a context of vertical fiscal imbalance that increased due to growing fiscal transfers during the positive external shock (boom) period. consequently, the subnational fiscal surplus was not a result of internal efficiency but of excess revenues from such transfers. Panel models were estimated to identify and assess the implicit incentives embedded in fiscal institutions of the decentralization model. findings at the municipal level are: i) misalignment of local spending with local interests due to dominance of transfers over own revenue (dominance of central government development policies); ii) incentive to spend transfers faster than own revenue (flypaper effect); iii) greater marginal contribution of own revenue to positive fiscal balances compared to transfers, thus introducing the seed for a soft budget constraint but hidden by the fiscal surplus; iv) disincentive to generate own revenue (tax and non-tax) due to the size and growth of transfers (disincentive to the culture of contributing to own revenue). findings at the prefecturall level are: i) misalignment with regional interests given the dominance of transfers over own revenue due to absolute lack of tax powers (until 2009); ii) high tendency to a soft budget constraint and, eventually, also fiscal bail-out, hidden by the fiscal surplus; iii) in only two departments collection of national-level taxes were higher, compared to transfers received in the same departments; iv) disincentive to pay the VAt (national-level tax) due to higher royalty transfers received, an effect not extended to other national-level taxes; v) high dependence from hydrocarbon-based transfers, and fiscal risk when this natural resource declines (both in volume and prices) due to volatility of international oil prices. Also, as a result of the decentralization model a positive and significant impact was found on education-coverage indicators, an important development objective of the national government.
This article examines whether the efficiency gains accompanying fiscal decentralization generate higher growth in more decentralized economies, applying pooled‐mean group techniques to a panel dataset of 23 Organization for Economic Co‐operation and Development (OECD) countries, 1972–2005. We find that spending decentralization has tended to be associated with lower economic growth while revenue decentralization has been associated with higher growth. Since OECD countries are substantially more spending than revenue decentralized, this is consistent with Oates' (1972) hypothesis that maximum efficiency gains require a close match between spending and revenue decentralization. It suggests reducing expenditure decentralization, and simultaneously increasing the fraction financed locally, would be growth‐enhancing. (JEL E62, H71, H72 )
The paper has analyzed the relation between the intra-provincial fiscal system arrangements and the growth of countylevel government human size,based on the county-level time series data of Hunan province from 1995 to 2008,using the grey correlation analysis taking the index of the decentralization of fiscal expenditure and revenue、 financial degree of self-sufficiency and average per person net fiscal transfer from the perspective of fiscal decentralization and transfer payment.In this paper,it gets conclusions that there is significant positive correlativity between fiscal decentralization,transfer measured by different indexes and government human size at county level of Hunan province,and the most powerful factor which can explain the growth of county-level government human size is intra-provincial government expenditure division decided by various provinces voluntarily,the second is intra-provincial revenue division system arrangements and finance self-sufficiency degree at county level,the last is transfer payment.It shows that intra-provincial fiscal division system possibly has some kind of gene which encourages county-level government human size to expand.Such phenomenon indicates that establishing sub-national intergovernmental fiscal decentralization and moderate scale of transfer are important approaches to control sudden inflation of county-level government human size.
The effects of globalization are perceived in the area of public administration as well as in many other areas and shows up as delegation of duties and authorities from central to local governments. This phenomenon is called decentralization that in a way requires local governments to have fiscal autonomy. Hereby, it is common for local governments to use their autonomy in infrastructure finance in many countries. It would also be possible for our country s local governments to have fiscal autonomy if capital markets, providing long-term finance, are utilized. In this study, we discuss several models, which local governments may utilize capital markets, and try to evaluate how to improve these models. We conclude that, investment trusts specialized in infrastructure finance would play a role of a central hub, where lots of capital market models may be implemented all together.
Used the panel data of 18 cities in Henan Province during 2000～2010,two hypotheses-the fiscal decentralization hypothesis and the hypothesis of economic openness were tested.Through LSDV method,the analysis found that,during the period of economic construction,the degree of fiscal decentralization plays a positive role,and economic openness has no effect on economic construction expenditure.Meanwhile,during the public finances period,the increase in economic openness will lead to the increase in government social security expenditure,and fiscal decentralization has no effect on social security spending.results show that the shift of the ideal of public finance system is an optimistic outlook.
China has built financial management system based on tax distribution,but due to the unclear powers and financial expenditure responsibility between central governments and local governments,unrealized independent finance power of local governments,and transfer payment failing to solve the problem of regional financial equilibrium and so on,this system constrains the local governments achieving the advantage in the allocation of resources and meeting the demand of area residents preferences.From view of local governments,this paper attempts to analyze the existing problems in the financial system in China,and puts forward corresponding suggestions.
Based on the provincial panel data,this paper analyzes the effect of the decentralization of education finance on the output of compulsory education.It comes to the following conclusions: firstly,the decentralization of education finance between central and provincial governments has no significant effects on the total output of local compulsory education,but has significantly positive effects on the output of urban compulsory education and negative effects on the output of rural compulsory education;secondly,the decentralization of education finance between provincial governments and governments under provincial level has significantly negative effects on the output of urban and rural compulsory education;thirdly,fiscal input into education has no significant effect on the output of urban compulsory education,but has significantly positive effect on the output of rural compulsory education.It states that China should increase the central fiscal input into rural compulsory education,and the decentralization of education finance at provincial level is conducive to the increase in the output of urban compulsory education.
Fiscal and financial decentralization consists of devolution of the financial resources and decision-making powers to sub-national governments that will allow them to implement the functions and responsibilities that have been delegated to them. In principle, every new responsibility must be followed with the appropriate level of resources and a precise definition of the resources of revenue for the execution of that new responsibility. In other words, finance must follow functions. The present research study entitled “The decentralized taxes as a tool for raising revenue from decentralized entities”. A case study of Gasabo District was been carried out with a purpose of helping decentralized entities to maximize their revenue collections. In this way, the specific objectives of this study were to identify various decentralized taxes collected by the districts, to compare the revenue collections before the Fiscal decentralization of 2006 (2003-2006) and the revenue collections after Fiscal decentralization (2008-2012), to determine the match between the annual collection targets and the revenue collections from decentralized taxes, and to come up with possible strategies on how decentralized taxes can increase revenue from decentralized entities. This research project is significant to policy makers at central government level to assess the level of success in meeting the targeted objective of fiscal decentralization policy. It will be significant to local government for identifying relevant strategies for better improvement of local taxation and to the researcher it serves as a partial fulfillment of the award of a degree in MBA and enriches the knowledge of researcher on the topic of study. Relevant literature related to the theories and models of other writers. As methodology, the study used both secondary and primary data. The researcher used the stratified random sampling technique to determine the sample size of 80. Quantitative method, comparative method, historical methods were used in this research. Secondary data was got from journals, documentation, which is in relation to the study objectives. Data entered in excel was presented by use of frequencies and percentages in tables. Data was been analyzed by using Statistical Package for Social scientists (SPSS. 18), was presented in table which showed the positive relationship between two variables. The research concluded that decentralized taxes have played a significant role for raising revenues from decentralized entities in Rwanda. Recommendation is made on focus to the channels that are more effective in mobilizing decentralized taxes in effective way such as focusing on cell channel and village channel as these are more effective channels for mobilizing decentralized taxes in order to get or raise more revenue, this can help districts to reduce the degree of dependency. The government should set appropriate strategies of tax recovery and improve database of taxpayers.
The article builds public goods provision comprehensive evaluation index,using the two-step system GMM estimation method,based on the Chinese city dynamic panel data to analyze the impact of fiscal decentralization and fiscal on public goods provision.The results show that land finance significantly reduces the quality of public goods provision,while fiscal decentralization helps to improve the quality of public goods provision.Further study found that the land finance promotes the economic public goods provision.But it has an obvious inhibitory effect on the economy of non-economic public goods provision.In addition,land finance impact on the public goods provision significantly differs from spatial and temporal,land finance promotes the east public goods provision increased,and then decrease the public goods provision in the central and western regions; As the land clinch a deal the price increased dramatically,land finance the negative impact on the public goods supply has improved significantly in 2004.
This paper uses cross-national data to examine the effects of fiscal
decentralization on educational outcomes in OECD countries. Measures of both
expenditure and revenue decentralization are included, in order to account for
the different dimensions of decentralization. Our estimated results show that the
decentralization of education expenditure responsibilities has a positive effect on
educational outcomes. These positive effects will be higher the higher the
autonomy of subcentral governments to decide on the different aspects of the
education system, and the lower the percentage of their expenditure that is
financed with conditional grants. In fact, positive effects of education
decentralization could be offset if a high percentage of the subcentral
government expenditure is financed with conditional grants from higher levels of
government. In addition, we find that the effect of expenditure decentralization
is higher the higher the percentage of taxes which are collected at the subcentral
level of government, i.e. when subcentral governments are held accountable for
taxing decisions.
This research was conducted to empirically prove the effect of financial performance measured from the ratio ofexpense to income, fiscal efforts, financing capability, and the level of fiscal decentralization degree towards anumber of variables, which are: (1) capital expenditure, (2) economic growth and poverty, (3) economic growthand poverty through capital expenditure, and (4) poverty through capital expenditure and economic growth.This research was performed using path analysis method. The samples of this research are 38 districts/cites inEast Java Province during the last 7 years (2005-2011).The result of this research shows that the financial performance measured from financing capability showsinsignificant direct effect towards capital expenditure and economic growth while the effect to poverty showspositive significant effect. Furthermore, from the effects of indirect financial performance through capitalexpenditure, there are variables of expenditure to income ratio, fiscal efforts, and degree of fiscaldecentralization variables which have significant indirect effects towards the economic growth (in a positive way)and poverty (in a negative way) while for the financial performance effects through capital expenditure andeconomic growth to poverty have significant indirect and negative influence, particularly those are measuredusing expense to income ratio, fiscal efforts, and the level of fiscal decentralization. Finally, in order to betterfinancial performance in particular it is necessary to optimize the financing capabilities in terms of both revenueand expenditure, in terms of revenue optimization of PAD, Silpa, and loan, while expenditure optimizers need toconduct a review of expenditure that has been done. Keywords : financial performance, expense to income ratio, fiscal effort, financing capability, the level of fiscaldecentralization, capital expenditure, economic growth, poverty
This paper studies the political economy of pricing and investment for excludable and congestible public goods in a federal state. Currently, we observe a wide variety of practices, ranging from federal gasoline taxes and road investment to the local supply of -- and sometimes free access to -- libraries, parking spaces and public swimming pools. The two-region model we develop allows for spill-overs between regions, it takes into account congestion, and it captures both heterogeneity between and within regions. Regional decisions are taken by majority voting; decisions at the federal level are taken either according to the principle of a minimum winning coalition or through cooperative bargaining. We have the following results. First, when users form the majority in at least one region, decentralized decision making performs certainly better than centralized decision making if spill-overs are not too large. Centralized decisions may yield higher welfare than decentralization only if users have a large majority and the infrastructure in a given region is intensively used by both local and outside users. Second, if non-users form a majority in both regions, centralized and decentralized decision making yield the same socially undesirable outcome, with prices that are much too high. Third, both bargaining and imposing uniform price restrictions across regions improve the performance of centralized decisions. Fourth, the performance of decentralized supply is strongly enhanced by local self-financing rules; it prevents potential exploitation of users within regions. Self-financing rules at the central level are not necessarily welfare-improving. Finally, the results of this paper contribute to a better understanding of actual policy-making.
This paper selects potential proxy variables of public preference, analyzes the impact mechanism between public preference and social security expenditure, and focus on the relationship among fiscal decentralization, public preference and social security expenditure by using provincial panel data (1998-2006). The result shows that fiscal decentralization measured by different indicators is significantly correlative with fiscal social security expenditure and exists spatial heterogeneity. The decentralization of fiscal revenues and degree of fiscal self-financing are significantly negative with social security expenditure, while the decentralization of fiscal expenditure is significantly positive with social security expenditure. The potential proxy variables of public preference are less significantly with local governments′ social security expenditure behavior, which suggests the fact that the vertical social security expenditure mechanism is yet responded affectively to social pension voices.
This article reflects some results of the work undertaken by the expert working group on optimization of public expenditures in the area of governance which contributed to the overall efforts on evaluating efficiency of the federal budget expenditures and forming recommendations on the optimization of such expenditures in 2013. This evaluation was conducted jointly by the Russian Academy for National Economy and Public Administration (RANEPA) and National Research University – Higher School of Economics (NRU-HSE) in cooperation with the Ministry of Finance, Ministry of Economic Development, and other federal authorities. The article is focused on the influence of decentralization policies on the efficiency and effectiveness of public spending both in a broad context and in one, based on the practice of delegating some federal powers to the constituent entities (regions) of the Russian Federation. Analysis of the federal budget execution data as well as some public sectors’ statistics demonstrates that the practice of delegation of the Russian Federation’s powers to the sub-national level which was accompanied by relevant budgetary transfers (subventions) has led to an excessive growth of the federal budget expenditure on the relevant areas (as compared to the GDP growth for the same period and the growth of the federal budget expenditures on the public administration as a whole). At the same time –at least in the selected cases –the efficiency and effectiveness of public spending, including performance outputs have decreased aft er the delegation of powers took place. Decentralization based on the delegation of powers has also resulted in new functions aimed at controlling the effectiveness of the delegated authorities’ performance. As a result, total administrative costs have increased. Given these conclusions it is recommended to switch from the practice of delegating authority to the practice of reallocating certain powers among the levels of government with a parallel reallocation of the budget revenue sources. Such a reallocation should be based on a detailed profound review of the efficiency and effectiveness of decentralization in each particularsector, with both the options of further devolution and recentralization being considered.