The current decentralization process escalating in Brazil since 1980 flanked by the endeavor of the democratization in the country, strengthened the role of the municipality once it was elevated to the status of autonomous federal entity by the Brazilian Federal Constitution of 1988. Upon 25 years of the given new democratic legacy, the municipal revenues increased in volume, in comparison to other spheres, due to the establishment of law and regulations accrediting new responsibilities and new obligations for the municipality. Although it was transformed into politics generator-making agent with potential to promote the local development, by means of power entitlement to be effective as well as the decision towards the design of such politics, the municipality has restricted autonomy towards political decision-making: most part of the resources tend to be transferred to a pre-defined destination via legislation or in the several programs set by the central government. Thus, public expenditures are increasingly as much as to be defined by federal rules as well as financial releases by conditional transfers to sectorial funds, restricted, in practice, to the autonomy of the local expenses. Henceforth, this essay is focused on the contribution to the debate about the possibility of municipal administrations to perform fundamental role of promotions of local development, with greater citizen participation and reduction of social inequalities of which surrounds Brazil, by highlighting elements for the proper analysis of the decentralization process towards the impact of public finance and municipal autonomy.
Public sector viewed as important with its numerous functions for a long time has recently become the locus of criticisms by many due to its unproductive and excessive size. One of the most emphasized factors which downsizes the public sector and makes it more efficient is the decentralization, moving more weight of this sector towards local administrations. There in fact, exists some predictions of how decentralization, leaving more of the public services and revenue sources to finance them, to sub-national government provides discipline in public sector. In this study, the disciplinary effects of decentralization on the public sector is tested using panel corrected standard errors procedure and the from OECD countries. The results show that decentralized public services and taxes up to some degree, limits the growth of public sector
Local Government finance is of immense importance for a state and for the government functions of rendering services to the citizens. Local finances reflect the fiscal independence of municipalities and the financial capacity to carry out its responsibilities under the legal provisions of the central government. It is therefore very important to monitor the development of local finance in transition countries and in transferring experiences from countries with higher fiscal decentralization to countries which are pre-accesion candidates to EU. Countries with higher fiscal decentralization are more acceptable bycountries that are recently new members of the European Union under similar region. In this study, a parallel overview of the local finances of new member country in the EU, Slovenia and pre-accesion candidate country to the EU i.e. Macedonia, was taken
This PhD thesis falls within the fields of public finance and public choice. It studies the following issues: ideological polarization, decentralization and conflict. It consists of three chapters can be read independently.
In the first chapter the focus is on the importance of ideological polarization between but also within political parties on the level and composition of cantonal public spending. The analysis is on Swiss cantonal parliaments and is based on the use and econometric treatment of a very rich database. We made two contributions to the literature on the impact of political fragmentation on public spending. First, we showed that ideological dispersion within political parties is associated with higher public spending while the dispersion between political parties is associated with less public spending. This finding implies that the mode of organization and discipline within political parties are both important. This result is particularly interesting given that previous literature has completely abstracted from ideological dispersion within political parties. Lastly, we showed that ideological dispersion between and within political parties is mainly relevant for current expenditures.
The second chapter focuses on the conflict of objectives that may exist between economic agents in a two-stage game with asymmetric payoffs. The literature showed that coordination failures are frequent in one-stage games and that communication can help individuals coordinate with the use of take turn strategies that allow for a reduction in the payoffs’ inequality in the long run. Our contribution was to study whether communication has the same capacity in a two-stage game where the subgame perfect Nash equilibrium requires both players to make opposite choices at both stages of the game and accept unequal payoffs. Our results show that coordination failures occur half of the time and that 18% of the pairs use the take turn strategy. Communication significantly increases coordination on the subgame perfect Nash equilibrium because it increases the ability of subjects to initiate a take turn strategy and to maintain it. Thus, communication allows subjects to establish a long-term strategy that increases efficiency and reduces payments differences, induced by the asymmetry in payoffs, by exchanging their relative positions in a fair way. Our results show that communication can solve coordination conflicts, even in more complex situations than in one-stage games usually studied until now.
The last chapter focuses on a particular type of conflict: political secessions. Specifically, it addresses the link between secessions, decentralization and group identity. We aim at determining, by means of a laboratory experiment, if decentralizing the provision of public goods reduces the likelihood of secession. We emphasize the importance of local identity. Our experimental design, obviously, do not reproduce all the trade-offs that separatist movements face in the real world. It allows, however, capturing at least two key forces that drive these movements: the proximity to public goods that reduces the phenomena of free-riding and brings public goods closer to citizens’ preferences and the importance of local identities. Our results indicate that the Decentralization treatment increases contributions to local public goods and decreases the likelihood of secessions also when identity is made more salient. If fact, reinforcing local group identity increases the likelihood of secession only when local group members are cooperators.
Introduction A successful local government is vital for the stability and economic success of developing countries in Africa. South Africa illustrates the importance of governance. Post-1994 South Africa emerged from a highly fragmented intergovernmental fiscal Contents Introduction ......................................................................................................297 Fiscal Decentralization: The Role of National Substructures ............................. 300 Overarching Legislative and Policy Frameworks of the Fiscal System .................302 Legislative Basis for Financial Management .......................................................305 Assignment and Division of Revenue ............................................................... 306 How to Manage Vertical and Horizontal Imbalances ................................... 308 Conclusion ........................................................................................................309 References ......................................................................................................... 311 relations system based on the ethnic homelands and African townships but within a unitary and highly centralized local government system. The postapartheid government tried to move to a radically decentralized fiscal system. Given the historical and geographical diversities of 283 newly established local government structures, fiscal decentralization raised a new set of questions of how national government could achieve horizontal and vertical equity.
The purpose of this study is to analyze performance and constraint factors of local decentralization from the Kim Dae Joong Administration to the Lee Myung Bak Administration in three different parts: administrative affairs, personnel affairs, and finance, and to find out the changes of Central-Local Intergovernmental Relation by Administration. First of all, the administrative affairs decentralization has improved by the increase of autonomous affairs and distribution of affairs, even though autonomous administrative power have maintained. The personnel affairs decentralization has reinforced in autonomy personnel affairs power and personnel distribution. The finance decentralization has maintained or weakened by decrease in autonomy financial power and both revenue & expenditure of tax. The constraint factors of local decentralization were legal & institutional restrictions such as range of affairs, fixed base & rate of tax and local tax structure focused on property taxation, and fiscal neutralism of Ministry of Strategy and Finance. In conclusion, the local decentralization of Korean Government has been improved disproportionately in the aspects of administrative affairs, human resources affairs, and finance. The Kim Dae Joong Administration was inclusive authority model, and the Nho Moo Hyun Administration and the Lee Myung Bak Administration was in the middle between inclusive authority model and overlapping-authority model, so after revival of the local self-governing system, relations between central and local government has been developed.
Based on concluding the experience of US municipal debt management,this paper analyzes the constraint mechanism of local government debt under the framework of decentralization and tax-sharing system.Viewed from intergenerational cost sharing) it is necessary to set up a demand-oriented constraint mechanism in the financing of public project,as the repayment capital of local government debt comes from the increasing tax burden of residents.Empirical analysis also shows that the demand response is better in welfare public project than that in monopoly and general public project.So we should pay more attention to the default risk of the latter ones.We believe that setting up demand constraint mechanism of public project financing and keeping the balance between investment cost of public projects and tax burden are keys to prevent local government debt from unordered expansion.
The thesis is focused on the evaluation of budget selected municipalities, especially in the context of the law of RUD and its changes in recent years. In the theoretical part are included the main views on municipal financing systems in terms of centralization and decentralization and also outlined the development of the redistribution of taxes in the Czech Republic and its major impact on the communities in the Czech Republic using aggregate data. Here, the author points out, that it would be better to consider greater fiscal decentralization, together with fiscal autonomy. However, it doesn't go well with recent changes in RUD in the Czech Republic. The theoretical part is then analyzed selected municipalities (representing various size groups of municipalities in the Czech Republic) regarding the development and structure of their budgets and major influences having an impact. Even from these analyzes it is quite obvious that the Czech Republic is rather greater tax depending on the state of municipalities (which relates to the growth of shared taxes) and thereby weakening the share of own revenues for municipalities. This is the opposite trend of development compared to other western countries. The Czech Republic also occurs (through laws RUD) to strengthen revenues for small and medium-sized communities, often at the expense of larger ones. These changes could actually lead to weakening of cooperation between the public and private sectors, as well as an inefficient financing and management of public funds for municipalities in the country.
This thesis brings out the important roles that the public sector finance and reforms play in shaping nations' welfare through providing empirical evidence using new data sets on the links between government spending and inflation, and between fiscal decentralization and development outcomes for the four Asian emerging economies of India, China, Indonesia and Vietnam. Chapter 2 empirically tests the nexus between government spending and inflation for the three countries of India, China and Indonesia utilizing the cointegration and the Vector Error Correction Model (VECM) method on time series data for the period 1970-2010. This chapter employs a bivariate VECM of government spending and inflation and, to address potential endogeneity concerns, two trivariate models with real GDP and nominal exchange rate separately added. The results show a cointegrating long-run relationship between government spending and inflation and that, in the short run, government spending can significantly influence the rate of inflation (positively for India and Indonesia while negatively for China). An important policy implication is that governments in the region would need to be more prudent regarding decisions to change government spending, which can potentially result in large fluctuations in inflation. Chapter 3 shifts the focus to fiscal policy matters at sub-national levels. This chapter examines the effects of fiscal decentralization on economic growth at the provincial level in Vietnam, an Asian economy with rapid growth performance resulting from the comprehensive reform, 'Doi Moi', starting in 1986. Using a newly available provincial-level dataset spanning the period 2004-2010, this chapter provides evidence that fiscal decentralization has had a significant and positive impact on provincial economic growth in Vietnam during the period of analysis. The measure of fiscal decentralization adopted captures both the fiscal capacity and autonomy of provinces. The fixed-effect and the Generalized Methods of Moments (GMM) models help address the unobserved heterogeneity and potential endogeneity issues. Finally, Chapter 4 further quantitatively investigates the effects of fiscal decentralization on development outcomes. Specifically, the two main hypotheses to be tested in this chapter are whether fiscal decentralization had significant effects on poverty outcome and health outcome at the provincial level in Vietnam during the period 2006-2011. Given the important role of the agriculture sector, the chapter also tests for other hypotheses that are concerned with sectoral growth patterns, the contribution of agricultural growth to poverty reduction, and the urban-rural gap in poverty. The main results suggest that fiscal decentralization had a positive effect on health outcomes but, surprisingly, did not contribute to poverty reduction. Another finding is that agricultural sector has made a significant contribution to poverty reduction in dominantly agricultural provinces. Also, the poorer regions have benefited from agricultural growth more than growth in other sectors. Finally, the chapter does not find significant evidence for the urban-rural gap for poverty in Vietnam. On balance, from a policy maker's perspective, while growth-enhancing effects are encouraging, the potential distributional effects of fiscal decentralization warrant careful considerations of the reform agenda so that the poor and the disadvantaged can share the gains in potential benefits.
This paper studies the education policy choices in a decentralized economy with two levels of governments and regional income disparity.We employ a dynamic game model incorporating overlapping generations to analyze the optimal education spending of the central and local governments,and the subsequent effects of such financing arrangements on the dynamics of regional income distribution.We show that,whether the central government should provide public education and what level should be provided would depend on the extent of regional disparity.Only when the disparity is large could the provision of public education by the central government improve social welfare and reduce regional disparity over time.The optimal education expenditure of central government,however,does not monotonically increase with the extent of regional disparity.Finally,policy implications for China are discussed.
Land finance has become one of the most important issues in government management and it is drawing wide attention in all social sectors.Local government' s marvelous growing rely on the land finance is significantly affecting our national economic and social development.Looking for the reason why the local governments excessive rely on the land finance is the present focus of theoretical research and management practice,but the debate on factors of land finance is still unsolved.The existed research on the influencing factors of the implementation of land finance is still not systematic,it needs theoretical frame to analyze and verify.The discussion is even rare in the view of soft budget constrain.Based on the view of soft budget constrain,this paper construct a systematic frame of a local government' s influencing factors,and then explain the mechanism of the implementation of local government' s finance.The practical value of this paper is that it identifies the key decisive factors of local government' s relying on the land finance,and then it offers the experience for better understanding of land finance behavior of local government and improving the relative government institution.Based on the soft budget constraint theory,and starting from fiscal decentralization system and official promotion system,this paper constructs a systematic theory model of influence factors including fiscal decentralization,political promotion and social development factors.It analysis the affecting relationship of fiscal revenue decentralization,fiscal expenditure decentralization,financial self-supply ability,fiscal dependents,official promotion competition,official characteristics,economic development level,urbanization level,industrial structure and land area on land finance.This paper empirically examines the influence factors of land finance in china,using panel data from257 municipal-level governments(form 2003—2007).The main conclusion and innovative points basically shows in the following three aspects;Firsdy,based on the traditional fiscal decentralization theory,this paper discusses the effect of financial revenue and expenditure on land finance.And meanwhile the concept of financial self-supply ability and fiscal dependents are introduced to discuss the effect of policy burden on land finance.Empirical study shows that a notable positive relationship exists between the fiscal expenditure decentralization and land finance.And also shows that there is a negatively relationship between fiscal revenue decentralization and land finance.Except for this,this paper also shows that there is a positively relationship between self-supply ability and land finance.Secondly,based on the promotion tournament theory,and started with the view of promotion competition of the local official,this paper analyzes the effect of promotion competition and official characteristics on land finance.The results show that there is no notable relationship between the promotion competition and land finance.But the official ' s age has a negatively effect on land finance,and official' s tenure has inverse U-shape effect on land finance.Thirdly,this paper also analyzes the effect of the other social development factors on land finance.It finds that economic development level,urbanization level,industrial structure and land area all have a positively affect on local governmental land finance.The value of this research is that it broadens and develops the application of soft budget constrain theory in China local government,it even provides a new dieoretical view for land finance,also it enriches the research of the land finance of local government.The practical value of this paper is that it identifies the key decisive factors of local government' s relying on the land finance.And then it offers the experience for better understanding of land finance behavior of local government and improving the relative government institution.
The relationship between fiscal decentralization and economic growth is an important research field of financial subjects. Most domestic empirical researches on the relationship between fiscal decentralization and economic growth focus on the decentralization of the cen tral and provincial governments, while less empirical analysis has been done on the relationship at lower-provincial level.Based on the panel data of the counties and cities of Fujian province during the period of 2003-2010,this paper conducts an empirical analysis of the relationship between the local economic growth and the four fiscal decentralization indicators, i.e. the tax revenue decentralization, the fiscal revenue decentralization, the fiscal expenditures decentralization and the degree of fiscal self-financing at lower-provincial level. The results show that the tax revenue decentralization, the fiscal revenue decentralization and the improvement of the fiscal self-sufficiency rate at lower-provincial level can play a significant role in promoting the local economic growth; while the fiscal expenditure decentralization has no significant effect on local economic growth. Based on these empirical results, this paper offers such suggestions as promoting tax revenue decentralization, having a multi-dimensional understanding of the fiscal decentralization, and making an in-depth study of the system and humanity factors underlying the fiscal decentralization.
The public finance in terms of revenue,expenditure and management,has significantly different institutional arrangements in urban and rural areas of China. Dual finance as the composition of binary economy system was formed in the specific historical period after the founding. It experienced the three stages of the planned economy period, the market economy transition period, and people's livelihood fiscal period. Through measuring the dualistic financial strength,it is discovered that dual finance appeared better and worse alternately in the first two stages,binary fiscal improving is the main trend in the third stage. At present,binary finance has new characteristics. The direction of the reform is to realize the equal basic public services between urban and rural areas. The problem of dual finance has to be solved by reasonable fiscal decentralization,coordination of regional differences,increasing the intensity of supporting agriculture,standardizing government behaviors and breaking the barriers of urban and rural dual structure fundamentally.
The government of Mongolia developed and passed a new Budget Law on 23 December 2011 in order to improve the legal framework for budgeting, budget relations and fiscal management by integrating the Budget Law of 2002 and Public Sector Management and Finance Law. \nThe purpose of new Budget Law is to ensure fiscal stability, enhance the efficiency and predictability of resource allocation, and to increase citizens’ participation in the budgeting process. The new Budget Law in its 11 chapters and 66 articles redefines the budgeting principles, scope, composition, classification of the budget, clarifies expenditure and revenue assignment, improves authorities and responsibilities of the bodies that participate in the budgeting process, and improves regulations on budget transparency and accountability.\nThe key new regulations introduced by the Budget Law concern the following areas:\n•\tPublic investment budgeting;\n•\tGovernment debt management;\n•\tProgram budgeting;\n•\tPublic private partnership;\n•\tFormula based transfer allocation; and\n•\tCitizens’ participation in budgeting.\n\nThe most important change introduced by new Budget Law is a reform of the intergovernmental fiscal relations system towards greater decentralization. The law clarifies expenditure assignments by clearly defining delegated functions and differentiating the functions among sub-national governments. It also introduces a formula based transfer allocation that will allow predictability and sustainability in the local budgeting process.
This dissertation contains three chapters and focuses on the optimal design of fiscal policy, both from a theoretical and from a quantitative perspective. In the first chapter, “Wealth Taxation and Life Expectancy,” I address the optimal taxation of wealth in a class of dynastic overlapping-generations economies with heterogeneous mortality risk. Working individuals are indexed by skills which are private information. Skills not only determine earning abilities but also correlate with survival probability, so that more productive agents on average live longer. The analysis distinguishes between the tax treatment of two possible sources of wealth, namely, savings and bequests, and points to the mortality gradient as a crucial determinant for optimal wealth taxation. Specifically, due to differential mortality: (a) earned wealth should be marginally taxed, (b) transferred wealth via bequests should be marginally subsidized, and (c) marginal tax schedules on bequests and inter-vivos transfers should be separated. I calibrate the model to U.S. data and quantitatively evaluate its tax implications. For the median worker, mortality differences create a force for marginally taxing capital mortality differences create a force for marginally taxing savings by up to 1.7%, and for marginally subsidizing bequests by as much as 3.4%. These figures are robust to the value of the societal intergenerational discount factor and can yield significant welfare gains. In the second chapter, “Taxing Atlas: Using Firm Data to Derive Optimal Income Tax Rates” (joint with Laurence Ales and Jessie J. Wang), we analyze the optimal taxation of top labor incomes. Top income earners are modeled as managers who are heterogeneous across skills and operate a span-of-control technology, as in Rosen (1982). Managers privately observe their skill level, which increases the productivity of both effort and supervision, thus creating a scale-of-operations effect. We characterize optimal taxes in this environment and identify novel determinants linked to firm technology. Our main result is that to be consistent with U.S. firm data, the optimal top income tax rate should be roughly in line with the U.S. tax code, in contrast to previous results in the literature. In the third chapter, “Regional State Capacity and the Optimal Degree of Fiscal Decentralization” (joint with Martín Besfamille), we study the optimal degree of fiscal decentralization in a federation. In our environment, regional governments are characterized by two dimensions of state capacity; namely, administrative and fiscal. These gauge the ability to deliver public goods and to raise tax revenues, respectively. Two regimes are compared: partial and full decentralization. Under partial decentralization, regional governments have no tax powers and rely on central bailouts to refinance incomplete projects. Under full decentralization, regional governments refinance incomplete projects through capital taxes, in a context of tax competition. We show how the optimal degree of fiscal decentralization hinges on the relative magnitudes of each type of capacity. Specifically, for sufficiently low levels of fiscal capacity, bailing out regional governments is optimal regardless of the level of administrative ability. However, a combination of low levels of administrative capacity and high levels of fiscal capacity calls for fully decentralizing tax powers.
The public finance in terms of revenue,expenditure and management,has significantly different institutional arrangements in urban and rural areas of China. Dual finance as the composition of binary economy system was formed in the specific historical period after the foundation of China. It experienced three stages: the planned economy period,the market economy transition period and people's livelihood fiscal period. Through measuring the dualistic financial strength,it is discovered that dual finance appeared better and worse alternately in the first two stages,binary fiscal improving is the main trend in the third stage. At present,binary finance has new characteristics. The direction of the reform is to realize the equal basic public services between urban and rural areas. The problem of dual finance has to be solved by reasonable fiscal decentralization,coordination of regional differences,increasing the intensity of supporting agriculture,standardizing government behaviors and breaking the barriers of urban and rural dual structure to fundamentally.
Fiscal decentralization and performance competition w ork together format the land finance. The research into how the land finance influence budgetary expenditure structure indicates that the land finance hasn't lessened the incentive of budgetary investment construction and the expenditure structure of to value investment,to overlook servicehasn't been corrected,w hich challenges the establishment of full-cover budget and optimization of fiscal expenditure structure.
As a country where the economic system still depend on financing of the public sector, the expectation that decentralization policy in Indonesia can improve significantly society welfare has not been fulfilled yet. Happened in Yogyakarta which has special authority in control government affairs. Constitution no 13 years 2012 about DIY privileges consist of 5 things like filling the positions, seat, job and authorities governor and vice governor, institutional affairs, culture affairs, land affairs, and spatial affairs. With the constitution expected DIY government can guarantee right of society to live in prosperity. However, the expectation still can not fulfilled either. This study aims to identify and explain the policy configuration of DIY Privileged Funds and determine the contribution of the DIY privileged funds in public welfare acceleration. The research type used is a qualitative approach. Data collection methods technique is dept interview and elite interviews, and documentation.
Participatory Budgeting (PB) has emerged as one of the major innovations in participatory governance for local management and local democracy worldwide. With more than 3,000 experiences recorded in over forty countries, PB is gradually changing the living conditions of increasing numbers of citizens across the world. Highly heterogeneous in processes and underlying ambitions, PB in its diversity provides a challenging alternative to the New Public Management-informed route to public sector reform. In most cases, PB has positively contributed to administrative modernization and other 'good governance' imperatives, including bringing substance to decentralization policies. In its most radical incarnations, PB has moreover contributed to inversing established spatial, social and political priorities in cities, in favour of the more deprived. This working paper briefly introduces the world-wide expansion of PB and the heterogeneity of current experiences before proposing two analytical frameworks to help differentiate between them. The heterogeneity of cases reflects substantially differing logics which can be described as political (for radical democratic change), managerial and technocratic (to improve municipal finance transparency and optimize the use of public resources for citizens' benefit) or good governance driven (to improve links between the public and citizens spheres). These logics are illustrated through the examples of Rosario (Argentina), Seville (Spain), Chengdu (China), Soligen (Germany), Dondo (Mozambique) and Porto Alegre (the iconic case in Brazil). Finally, the paper closes with an assessment of PB's major contributions to democratic governance, as well as its on-going challenges and limitations to date. Specifically, we bring attention to PB's potential in reverting (political and territorial) priorities, deepening decentralisation and administrative modernisation; but also ongoing challenges in deepening the deliberative quality of PBs, citizen's education and the institutionalisation of participants' power.
The reform of intergovernmental fiscal relations and budget required the development and approval of a significant number of regulations. This is due to the fact that each of the new organizational and legal forms (treasury, budget (public institutions of a new type) and autonomous institutions) have to be very essential features of the legal status of institutions, and the specifics of conducting basic and income-generating activities. Reforming the budget system of Russia is carried out for decades, but despite all efforts, the public sector is one of the weakest and most fragile sectors of the economy. Fiscal reforms are carried out on the Russian way «optimal decentralization», whose principles and concepts were borrowed from contemporary European experience of reforming the management of public finances. This concept involves the creation of a stable interest and incentives for all participants in the budget process to achieve specific, measurable and socially significant results.