This paper explores the relationship between fiscal decentralization, green finance, and the digital economy in driving sustainable development, using a balanced cross-country panel dataset spanning 2014–2022, for 29 European countries. Employing dynamic panel estimation techniques, including system generalized method of moments (GMM), the research investigates how fiscal decentralization, green finance, and the digital economy (each of them individually and through interaction mechanisms), dynamically shape sustainable development performance in the presence of endogeneity and temporal persistence. The findings reveal strong inertia in sustainable development, which depends on its previous level. Fiscal decentralization has complex effects: revenue autonomy supports sustainability, whereas expenditure autonomy may undermine it, suggesting differences in how resources are used efficiently at the local versus central levels. Digitalization acts as a catalyst, boosting the effectiveness of environmental taxes and enhancing local spending outcomes. However, if fiscal administrations are not digitally integrated, digitalization may weaken the benefits of decentralized revenues. This study advances the literature by integrating fiscal, financial, and digital views, providing new insights into policy coordination.
Abstract How does existing research explain India’s public service delivery challenges? This chapter provides an overview of how political economists and state capacity scholars have made sense of India’s governance problems, including a politicized bureaucracy, an overburdened administration, corruption, underwhelming monitoring and accountability structures, and poor decentralization. We argue that both the political economy and state capacity literature do not recognize the role of public financial management in fuelling many common problems. At the same time, literature on public finance is limiting because it fails to link fund flows to effective public service delivery. We bridge these varying streams of literature by explaining how the government’s expenditure capacity is critical for policy implementation.
Abstract Given the complexity of an on-demand architecture for public financial management (PFM), how can governments effectively implement these changes? This chapter outlines four approaches that can enable changes in a decentralized manner, without forcing them from the top down. One, any changes to PFM must align with the incentives of individuals in the system. Two, the system should be modified with agile development in mind, using adaptive planning, fast delivery, constant learning and improvement, and rapid response to change. Three, asynchronous onboarding, or the idea that stakeholders can adopt and integrate with the overall PFM system in their own time, can make sure these changes work within India’s complex federal structure. Four and relatedly, we discuss how changes in PFM can be undertaken within the existing institutional structure. By following these approaches, governments can navigate the complexities of changes in architecture of PFM while fostering sustainable and scalable improvements in public service delivery.
By 2026, India's urban transition is no longer a gradual demographic shift it has become the central axis of national economic stability. Cities are now the primary engines of growth, employment, and productivity. Yet the financial architecture that supports them remains structurally weak. The 16th Finance Commission (2026–2031), chaired by Arvind Panagariya, faces a defining challenge: redesigning fiscal federalism at a moment when urban India is expanding faster than its capacity to finance itself. Urban Local Bodies (ULBs) stand at the heart of this tension. Although cities contribute a growing share to India's GDP, their financial autonomy remains constrained. The combined budget of India's 4,500+ ULBs amounts to roughly 1.3% of GDP, while their own-source revenue (OSR) generation is only about 0.6%. This gap reflects a deeper structural imbalance between expenditure responsibilities and revenue-raising powers. The weakness is most evident in property taxation the cornerstone of municipal finance worldwide. In India, property tax collections hover around 0.2% of GDP. In comparison, the OECD average stands at 1.08%, while countries like the United Kingdom (3.11%) and Canada (3.05%) demonstrate the fiscal potential of robust property tax systems. India's "property paradox" is rooted in valuation gaps, outdated rent control regimes, and extensive exemptions. Despite rising real estate values, tax realization remains minimal. At the same time, climate change has moved from a distant threat to a measurable economic variable. Heatwaves, floods, and water stress now erode an estimated 4–6% of GDP annually through productivity losses and infrastructure damage. In this context, fiscal reform must evolve into what can be called "Green Federalism" a framework that embeds climate performance within intergovernmental transfers. With the operationalization of the Bureau of Energy Efficiency-led Carbon Credit Trading Scheme, alongside the sovereign AI initiative BharatGen, Ind...
The article presents a comprehensive study of the transformation of intergovernmental fiscal relations in Ukraine under the dual influence of the fiscal decentralization reform of 2014–2020 and the unprecedented wartime shock of 2022–2025, alongside the emergence of a donor-conditional post-war reconstruction architecture. The author delineates the basic categories: intergovernmental fiscal relations, fiscal federalism, fiscal and budgetary decentralization. The author substantiates the thesis that the Ukrainian reform implemented predominantly budgetary rather than fiscal decentralization due to the dominance of shared taxes without local control over the base and rate. The impact of Law No. 3428-IX, which redirected the «military» personal income tax to the state budget from 1 October 2023, and the freezing of the reverse subvention is analyzed as an institutional precedent that distorts horizontal equalization. Growing territorial disparities are identified between the capital (39 % of municipal-level revenues in 2024), western agglomerations, and frontline communities that lost up to 45 % of revenues. The article reveals the risks of a «two-channel» community financing system through the Ukraine Facility of 50 billion euros for 2024–2027, the World Bank SURGE programme, and the European Investment Bank instruments. The author proposes a hybrid model of transformation of intergovernmental fiscal relations involving a differentiated PIT allocation rate depending on the status of the community, the replacement of the reverse subvention with a territorial solidarity fund based on a multifactor distribution formula, and an integrated project cycle with external donor instruments. Six substantive theses concerning the further architecture of the system are formulated with reference to the fiscal rules of the European Union and the subsidiarity principle of the European Charter of Local Self-Government. Particular attention is paid to the institutional strengthening of the meso-level following the Polish experience of establishing regional accounting chambers and associations of self-government.
This study explores the current landscape of fiscal decentralization in India, with particular attention tothe financial structure and functioning of rural and urban local government bodies. It investigates thecomposition and trends of own-source revenues versus intergovernmental transfers, the extent of fiscalautonomy enjoyed by local institutions, and the institutional and policy challenges that hinder effectivedevolution of financial powers. Drawing upon secondary data, government reports, and existing scholarlyresearch, the paper analyses persistent vertical and horizontal fiscal imbalances, variations across states, andthe implications of limited fiscal capacity on local governance and service delivery. Furthermore, the studyidentifies critical policy gaps, administrative bottlenecks, and capacity constraints that undermine the objectivesof decentralized governance. It concludes by proposing strategic reforms to strengthen fiscal empowerment,improve transparency and accountability, and enhance the overall effectiveness of India’s multi-tiered fiscalframework
Since the late 1980s and early 1990s, amid structural reforms and the constitutional review process, the Government of Mozambique has recognized decentralization as a central strategy to promote grassroots development. This research aims to analyze the impact of decentralization on improving the quality of life of residents in Mozambique. To achieve this objective, a mixed case study approach was used. Data were collected through bibliographic and documentary research, supported by interviews and questionnaire surveys. The results indicate that the poverty alleviation strategies adopted by the Municipality of Chimoio to improve the quality of life include promoting youth entrepreneurship and financing income-generating projects. The municipal administration has encouraged resident participation in local management. The fiscal decentralization process has shown satisfactory results. During the 4 years and 5 months of governance, the municipality's performance was positive, with 96.5% of targets being met, with 417 of the 435 planned activities having been carried out. It is concluded that decentralization has a significant impact on improving the quality of life of residents. It is recommended that the functional competences derived from fiscal decentralization be maximized, with a focus on improving the collection and management of municipal revenues, to face the challenges that this process imposes.
Zubair Ahmed Pirzada, Nida Shafaat, Shoukat Ali Mahar
This study examines how incomplete devolution shapes governance in Sukkur, Pakistan. Despite Article 140-A’s constitutional mandates decentralization, municipal functions including water and sanitation, urban planning, and local revenue mobilization, remain under provincial control. An exploratory qualitative case study drew on six semi-structured interviews with municipal officials, legislators, and citizens, supplemented by government documents, and scholarly literature. Thematic analysis identified four interlinked challenges: (1) limited local authority and overlapping jurisdictions, (2) fiscal constraints undermining local projects, (3) service delivery gaps that erode citizen trust, and (4) competing narratives over whether devolution deficits are genuine or politically exaggerated. Findings show politicized fiscal transfers intensify constraints, weakening accountability, delaying improvements, and depress civic participation. Local capacity deficits also contributes. Policy recommendations prioritize activating the Provincial Finance Commission, strengthening municipal capacity, and progressively devolving authority. Sukkur’s case illustrates ‘incomplete decentralization’ in the Global South, informing reforms in Pakistan and comparable contexts.
The article provides a comprehensive comparative analysis of the fiscal decentralizatio mechanism in Ukraine and the European Union countries, with a focus on its impact on the financial capacity of local self-government. It is substantiated that fiscal decentralization is a key instrument for ensuring sustainable socio-economic development of territories, as it determines the level of budgetary autonomy, the stability of local budget revenues, and the ability of territorial communities to perform their own and delegated functions effectively. The current state and dynamics of fiscal decentralization in Ukraine during 2022–2024 are analyzed, taking into account the influence of martial law and war-related challenges on the structure of local budget revenues and the degree of dependence on interbudgetary transfers. The study conducts a comparative assessment of key quantitative indicators of fiscal decentralization in Ukraine and selected EU countries, including the share of local budgets in the consolidated public budget, the proportion of own-source revenues, the role of intergovernmental transfers, and the level of tax autonomy of local authorities. The results demonstrate that EU countries are characterized by higher financial stability of local governments, a greater share of own revenues, and more effective fiscal equalization mechanisms. Based on the analysis, quantitative benchmarks for adapting European fiscal decentralization practices to the Ukrainian context are proposed, aimed at strengthening the financial capacity of territorial communities. The findings may be used in shaping public finance policy, particularly in the context of European integration and post-war recovery of Ukraine.
The two outstanding trends in 1966 had been: (a) the organizational development of the hospital, resulting from a flexible social structure and evolution toward a largely decentralized hospital; and (b) the increasing quantity and quality of trained staff. These trends continued, resulting in three county units for both patients and staff. The total separation of the hospital into three semi-autonomous units based on their geographical identity was not fully realized. Our total patient population of 400 patients did not make it practicable to have three separate admission units with their inevitable drain on staff. The same applied to the special unit for the mentally retarded. So we ended up with a mixture of geographical and functional hospital units.
The urban administration in Pakistan has transformed as a result of political and economic shifts. The urban government in Pakistan has been influenced by external financing, which is a reflection of institutional reforms, fiscal decentralization, and the priorities of global development. Over the course of the last three decades, Pakistan's urban management has transitioned from a centralized bureaucratic authority to fragmented local governance systems that are shaped by donor-driven projects and conditional cash inflows. An in-depth analysis of how multilateral development banks and bilateral aid influence urban policy, infrastructure, and service delivery is presented in this specific piece of writing. The evidence demonstrates that the use of external financing has hastened the process of urban modernization while simultaneously exacerbating governance problems such as policy incoherence, accountability deficiencies, and socio-spatial inequities. In this study, political economics research and urban planning perspectives are combined in order to investigate how external funding mechanisms influence the capacities of local governments and the transformation of urban infrastructure in Pakistan's fast-growing cities. The findings highlight the necessity of having governance structures that are adaptable and, in a position, to strike a balance between local interests and global urban finance strategy.
This paper examines human resource management (HRM) practices in Ghana's local government and advances a twofold argument. First, it shows that decentralization reforms introduced in the 1980s and 1990s locked the system into a path-dependent governance trajectory. This has narrowed the scope for alternative approaches to achieving an effective HRM system. Second, despite formal provisions establishing local governments as autonomous and non-partisan, the findings reveal that informal norms, political patronage, and asymmetric power relations remain central in shaping HRM decisions. These realities affect staff motivation, retention, and organizational performance, often impairing formal HR procedures and meritocratic intent. The paper challenges taken-for-granted assumptions that implementing cookbook governance and/or new public management prescriptions can automatically improve institutional effectiveness and service delivery in developing countries. Instead, it argues for greater attention to historical legacies and political contexts. The paper contributes to scholarly debates on public sector management and state capacity by highlighting the limits of technocratic and one-size-fits-all approaches to strengthening subnational governance
This thesis examines how the structure of municipal finance and budget governance affects the economic capacity of municipalities on the Faroe Islands. In recent decades, Faroese municipalities have been assigned increasing responsibility for welfare services, including elderly care, while substantial differences persist in municipal size, tax bases, and administrative capacity. These structural differences raise questions about whether the current decentralized governance system provides sustainable economic conditions for all municipalities. The study analyzes how the Faroese municipal financing and budgeting model is organized and explores the economic challenges municipalities face in practice. The analysis draws on qualitative interviews with Faroese mayors combined with document analysis of policy reports, legislation, and economic assessments. The empirical findings are interpreted through theoretical perspectives from fiscal federalism, incremental budgeting, soft budget constraint theory, and research on intermunicipal cooperation.The analysis shows that differences in population size, demographic composition, and tax bases create unequal economic conditions across municipalities. Smaller municipalities appear particularly vulnerable to economic shocks, demographic ageing, and large investments. While intermunicipal cooperation can enhance administrative capacity, it may also generate coordination challenges and common-pool dynamics. Furthermore, the financing model for elderly care contributes to uneven financial pressures between municipalities. The thesis concludes that the current institutional framework may create long-term challenges for the sustainability of municipal welfare provision. Possible policy responses include adjustments to the financing model, stronger equalization mechanisms, or structural reforms aimed at ensuring more economically robust local governments.
Cities are central to climate adaptation but face growing risks from flooding, heat, and water insecurity that disproportionately affect the urban poor (IPCC, 2022; Dodman et al., 2022). Although urban climate finance has increased, municipalities-especially in the Global South-often lack the fiscal autonomy and institutional capacity to access and deploy these resources effectively (Diezmartínez & Gianotti, 2024). Weak fiscal decentralization, fragmented intergovernmental transfers, and limited borrowing authority constrain local investment in climate-resilient WASH and infrastructure (Sow & Razafimahefa, 2015). In Bangladesh, climate-induced migration intensifies urban service deficits, reinforcing vulnerability among low-income and informal populations (Banks et al., 2011; Tanjeela, 2023).
C J Noorjahan, Ms. Saranya Durga K, Mrs. Ruth Rebecca R
This paper discusses the Union-to-State tax devolution in India during the years 2015 to 2024, which is constructed based on the proposals of the 14th Finance Commission and the 15th Finance Commission. It provides the vertical fiscal imbalance that persists in India, with the Union dominating the significant sources of revenue and the horizontal imbalance between the States with varying capabilities and needs. Based on secondary data in budget documents, Finance Commission reports, and Reserve Bank publications, the study runs both descriptive analysis and chi-square tests in determining the stability and equity of tax transfers. The research results indicate that tax devolution has been inequitable and fluctuating. Big States like Uttar Pradesh, Bihar and Madhya Pradesh got the maximum shares, with little going to the smaller States like Goa, Sikkim, and Mizoram. Arunachal Pradesh was a small state because of its strategic and geographical location. This was proven right by statistical tests, which means that State size had a significant effect on levels of allocation. The general trend also showed instability, whereby devolution reached its highest point in 2015-16 and was very low in other years, and this makes it hard for the States to plan their finances. Though the share of taxes to the States was raised by the 14th Finance Commission, subsequent changes in the 15th Finance Commission led to average transfers to many States, strengthening inequalities. The research concludes that the existing devolution system still favours the bigger States and proposes a more transparent, equitable and need-based system to reinforce fiscal decentralisation and create a balanced regional development.
This paper contributes to the recent literature on the FDI--growth nexus by investigating whether fiscal decentralization moderates the growth effects of foreign direct investment (FDI). Using a panel of 69 countries over 1996--2020 with fixed-effects and system-GMM estimations, we show that while FDI generally promotes economic growth, its positive effect is significantly attenuated in countries with higher levels of fiscal decentralization, on both the revenue and expenditure sides. We further identify infrastructure quality as a transmission channel through which expenditure decentralization dampens the FDI--growth nexus, suggesting a reduced capacity to finance national public goods in highly decentralized settings. These findings highlight the importance of intergovernmental coordination in preserving the growth effectiveness of foreign investment, and open new avenues for research on the institutional determinants of the FDI--growth nexus.
Most decentralized autonomous organizations (DAOs) use a 1-Token-1-Vote rule, allowing capital ownership to translate directly into governance power. This paper evaluates how a Quadratic Voting (QV)-inspired square-root reweighting counterfactual would affect voting outcomes in the Arbitrum DAO. For this, a time-paginated pipeline was developed to retrieve approximately 850,000 off-chain Snapshot vote records across fifteen of the DAO's highest-turnout proposals where each participating wallet's token-weighted voting power was replaced with its square root, and the proposal outcomes were recalculated. The results reveal extreme concentration of voting power, with a mean Gini coefficient of approximately 0.9950 among active participating wallets. In some proposals, the ten largest participating wallets or delegates collectively controlled as much as 86.87% of the total voting weight. Consequently, square-root reweighting changed the winning outcome in four of the fifteen proposals (26.7% of this purposively-selected, high-turnout sample), demonstrating that these outcomes were sensitive to the distribution of voting power across wallets. Its effect on victory margins was heterogeneous: margins widened in six proposals and narrowed in nine, with changes ranging from a 55.90-percentage-point expansion to a 37.76-percentage-point contraction. Notably, all four outcome reversals involved funding, grants, security expenditure, coalition financing, or related resource-allocation decisions. These findings suggest that square-root reweighting can alter both the magnitude and direction of token-weighted governance outcomes by reducing the relative influence of highly concentrated token holdings.
Decentralized Autonomous Organizations (DAOs) aim to foster decentralization but often exhibit "shadow-centralization" (i.e., a small group essentially exercises their governance power in voting, despite the wide distribution of voting rights). While prior literature has noted the potential for centralization in DAOs, it has not adequately distinguished between the centralization of governance power (i.e., tokens) holding and the centralization of power exercise through voting, nor has it examined the transition from the former to the latter. Furthermore, the literature has underexplored the consequences of this power transition for governance outcomes and the related contingent factors. Our study fills this gap by explicitly examining how centralization shifts from holding to voting and how this transition impacts the performance of DAO-governed decentralized applications (DApps). We also examine how these effects are contingent on the capability of voters and the nature of the governance issues. Focusing on both on-chain and off-chain DAOs, we find that an increase in centralization from holding to voting negatively affects DApp performance, confirming that concerns about "shadow-centralization" are warranted. We also find that this negative impact is mitigated when voters possess greater experience and connectivity than the broader group of token holders. Also, the adverse effect is more salient for proposals requiring higher deliberation and is less salient for novel proposals. Our study advances the understanding of DAO governance by highlighting the source of shadow centralization and reveals that it implications depend on who votes and what they vote on.
Decentralization is widely promoted as a governance reform to improve efficiency, accountability, and responsiveness in public service delivery, particularly in the health sector. In Pakistan, the 18th Constitutional Amendment of 2010 marked a significant shift in governance by devolving health sector responsibilities from the federal government to provincial governments. This reform substantially transformed Public Financial Management (PFM) arrangements in the health sector, affecting budgeting, expenditure control, and accountability mechanisms. This paper examines the impact of decentralization on health sector PFM in Pakistan by situating the reform within broader theoretical and empirical literature. It analyzes changes in health financing, governance, and service delivery outcomes while identifying persistent institutional and fiscal challenges. The study argues that although decentralization has enhanced provincial autonomy and policy responsiveness, weaknesses in public financial management capacity, coordination, and equity continue to limit its effectiveness. Strengthening PFM systems is therefore essential for translating decentralized governance into improved health outcomes in Pakistan.