Blockchain Papers

Fermín Cabasés, Pedro Pascual, Jaime Vallés Giménez

No abstract is available for this record.

Lars–Erik Borge

Compared with most countries the Norwegian system of financing local governments is highly centralized. Grants make up a substantial part of revenues and local taxes are highly regulated by the center. The development of the system was motivated by a desire to equalize service provision throughout the country. The purpose of this paper is to analyze possible consequences of more decentralized financing with local tax discretion. Contrary to the conventional wisdom the analysis indicates that decentralized financing is likely to give more equal provision of local public services. In addition, substantial efficiency gains can be obtained.

Elliott Parker, Judith Thornton

In this paper we review the fiscal evolution of China and Russia, asking how the process of creating a separate, tax-financed public sector in the two countries differed. We observe that the size of China's budget sector was consistently smaller than in Russia and that budget decentralization was consistently greater. We see both pros and cons in China's decentralization. Local governments that were allowed to keep marginal increases in local tax revenue had incentives to pursue growth-supporting policies, including support for foreign investment and export-oriented production. However, in the absence of financial markets, there were barriers to investment outside the local region, resulting in inefficient use of capital and protectionism. Fiscal deficits and rapid expansion of credit have threatened stability in both countries, but China has proved more successful than Russia in managing macroeconomic policies. Finally, we argue that Russia's status as a petro-state makes management of the public sector particularly difficult. In Russia, recentralization has been associated with expansion of state ownership of enterprises and production by territorial governments, state ministries, state banks, and the natural monopolies.

Philip van Ryneveld

Since South Africa held its first democratic elections in 1994, it has given significant attention to building an effective system of decentralization including provincial and local government. While provincial governments are responsible mainly for the implementation of social services such as health and education, the provision of much of the urban infrastructure is the responsibility of local government. Although many challenges remain, the country has made significant progress over the past decade in addressing urban service backlogs in poor areas. At the same time, it has greatly improved macroeconomic fundamentals. The system of financing local government seeks to place accountability firmly at the local level, with most revenues in the larger urban centers raised locally through a combination of local taxes and fees for services, while poorer regions are predominantly grant funded. The objective has been to encourage the financing of capital infrastructure through local borrowing based on sustainable, transparent local finances rather than national repayment guarantees, which are outlawed. There is some indirect subsidization of loans through the state-owned Development Bank of Southern Africa. But the emphasis is on achieving redistribution through transparent, formula-based grants paid directly from national to local governments. While further bedding down of the system is needed, the approach is proving largely successful. The paper concludes by recommending that the existing division between provinces as providers of social services and local governments as the key locus of responsibility for services related to the built environment should be strengthened, particularly through the devolution of more urban transport related functions. A number of key risks are also highlighted, including issues related to the reform of local business taxes.

Ming Su, Quanhou Zhao

China has experienced more than 25 years of extraordinary economic growth. Underlying this growth has been a decentralized fiscal system, in which provinces and large cities are given the freedom to make infrastructure investments to stimulate local development, and are allowed to retain a large part of the fiscal revenues that are generated from economic activity. Although successful as a growth strategy, this policy created two problems for national fiscal management. First, it significantly reduced the central government's share of fiscal revenues, which fell from 34.8 percent in 1980 to 22 percent in 1992. Second, it widened economic and fiscal disparities between the rapidly growing urban coastal region and the rest of the country. Rapid growth in subnational debt (which rose 23-fold in a decade) and subnational nonperforming loans (estimated by the authors to range between US$100 billion and US$150 billion) has placed pressure on China's financial system. Traditionally, China has favored bank lending as a source of finance because the banking system has provided a vehicle for central political control over local debt. But as China's financial system matures, creditworthiness standards must become more important. The authors recommend greater use of the revenue streams from infrastructure assets as a financing source, and gradual relaxation of central political control over subnational debt. One step in this direction would permit leading cities to issue municipal bonds based on objective financial standards.

Xiaobo Zhang

No abstract is available for this record.

Cândido Alberto Gomes, Robert E. Verhine

O sistema de financiamento da educação no Brasil se caracteriza por uma estrutura complexa, com problemas de eficiência, eficácia e eqüidade, ao tempo em que se apresentam algumas iniciativas novas como possíveis soluções para as dificuldades enfrentadas. Estas características têm sido objeto de interesse crescente por parte de estudiosos e formuladores de políticas, tanto pela percepção das limitações do sistema vigente como pelas mudanças administrativas e fiscais promovidas pela Constituição de 1988 e, mais recentemente, por alguns governos estaduais e municipais. Este artigo analisa o referido sistema, examinando cada um dos aspectos acima mencionados. O texto inicia descrevendo a organização e estrutura do sistema, fornecendo, a seguir, um panorama das despesas em educação; identifica os problemas principais e descreve algumas experiências recentes que, de forma ainda parcial, tentam solucioná-los. Na sua conclusão, os autores argumentam que, para que se efetive as recentes mudanças, há necessidade de implementar-se procedimentos de avaliação e acompanhamento de forma a saber em que medida os remédios combatem as doenças ou os primeiros podem ser aperfeiçoados. PALAVRAS-CHAVE: educação; finanças públicas; sistema educacional; despesas em educação; municipalização; descentralização. Financing public education in Brazil: A political-economical perspective The system of financing education in Brazil is characterized by a complex structure, with efficiency, efficacy and equity problems, while presenting some new initiatives as possible solutions for the difficulties that are being faced. These characteristics have been the object of growing interest on the part scholars and policy makers, in terms of the perceived limitations of the system, as well as by the fiscal and administrative changes promoted by the 1988 Constitution, and more recently by some state and municipal governments. This article analyses the system, beginning with its organization and structure, and then provides an overview of education expenditures. It identifies the major problems and describes some recent experiences, trying to solve them in a partial way. In its conclusion the authors discuss that to put the recent changes into practice it is necessary to implement evaluation and assessment procedures that enable the identification and improvement of the most effective initiatives. KEY WORDS: education; public finances; educational system; expenses on education; municipality issues; decentralization. Publicação Online do Caderno CRH: http://www.cadernocrh.ufba.br

Elena Ianchovichina, Lili Liu, Mohan Nagarajan

In the late 1990s the Indian state of Tamil Nadu experienced an unprecedented fiscal deterioration, which was part of the widespread fiscal deterioration in Indian states. This deterioration was troubling because current expenditure outgrew total revenue, leaving little fiscal space for infrastructure spending. The paper presents a framework for subnational fiscal sustainability analysis and applies it to Tamil Nadu where subsequent fiscal adjustment has been ambitious and politically challenging, but has promised to put state finance on a sustainable path and create fiscal space for infrastructure investment. The paper emphasizes the differences between fiscal sustainability analysis at the national and subnational levels, attempts to take into account uncertainty, and discusses the key components of the state's fiscal accounts and how they respond to reforms and shocks. Risks to Tamil Nadu's fiscal outlook include interest rate shocks, pressures on the primary balance, and contingent liabilities. Though the state's efforts to remove constraints to economic growth, minimize recurrent expenditures and maximize its revenue potential will be critical for fiscal sustainability, national policies feature prominently in subnational fiscal adjustment. Tamil Nadu's quest for fiscal sustainability is relevant for other countries. Decentralization has given subnational governments in developing countries significant spending and taxation responsibilities, and the capacity to incur debt. The fiscal stress of the Indian states echoed the fiscal crises of subnational governments in several other major emerging economies.

Eric J. Brunner, Jon Sonstelie

The 1971 ruling of the California Supreme Court in the case of Serrano v. Priest initiated a chain of events that abruptly ended local financing of public schools in California. In seven short years, California transformed its school finance system from a decentralized one in which local communities chose how much to spend on their schools to a centralized one in which the state legislature determines the expenditures of every school district. This paper begins by describing California's school finance system before Serrano and the transformation from local to state finance. It then delineates some consequences of that transformation and draws lessons from California's experience with school finance reform.

Darshini Mahadevia

This comparison is not restricted to Mumbai and Shanghai but also to Bangalore and Hangzhou, Delhi and Beijing and so on. The Chinese and Indian economies are expected to be the growth engines of the global economy. In this process cities are expected to play an important role, through their transformation into “World Class” cities, a term now doing rounds in the policy circles in Mumbai, to be achieved through massive infrastructure investments made in them. In China, this has been possible because of the decentralized administrative and fiscal system in China. In contrast, in India, the system of urban infrastructure is currently evolving and making a transition from a centralized to a decentralized system. This paper: (i) compares the Chinese and Indian financial systems to explain differences in the quantum of funds available in cities in both countries; (ii) looks at urban responsibility allocations in terms of institutions; and (iii) compares capital investments made by one city each in the two countries, in Beijing (China) and in Mumbai (India). Edited by Xinyu Fan

Charles B. Blankart, Rainald Borck

In this essay, we survey the literature on local public finance. The first part deals with the normative theory of local public finance, starting from the question when it is beneficial to decentralize public services. We then analyze the functioning of a system of competitive jurisdictions in the spirit of Tiebout. The final part of the essay deals with constitutional design. In particular, we ask when and how local governments have to be regulated in order to prevent destructive competition or contain monopoly power, and we describe which institutions might perform these tasks.

Richard Bird, François Vaillancourt

This book addresses a variety of issues
\n relating to intergovernmental finance and the provision and
\n financing of local services including budgeting and
\n financial management, the institutional framework for the
\n conduct of intergovernmental relations, appropriate methods
\n of service delivery in metropolitan agglomerations and
\n remote rural areas, local government enterprises, user
\n charges, property taxes, income and value-added taxes,
\n natural resource taxes, and local business taxes.
\n Throughout, the authors draw on experience both in Canada
\n and in other decentralized countries and consider to varying
\n extents the special problems facing Russia and other large
\n transitional economies.

Lixin Colin Xu

The evidence from China (and India) suggests that regional variations in FDI inflow and marginal productivity of capital can readily be explained by some of the usual and un-usual suspects: tax burden, corruption, expected growth rate, infrastructure, access to finance, court and custom efficiency, and quality of life. Given the vast variations in all these dimensions in various regions in China due to the decentralized nature and geography, the large variations in capital-labor ratio and marginal product of capital are perhaps not too difficult to rationalize. The fact that MPK depends on ownership, local leadership, and finance suggest that there is perhaps allocation inefficiency. What are fundamental causes, and their relative importance, and how important is the magnitude of inefficiency, however, remains to be investigated.

Huang Chun-le

Division of responsibility and authority for local government debt is an important part of decentralized public finance management system.It has become a precondition to legitimize local government debt in order to solve the current problems in our country.Legitimizing is to identify not only debt-financing rights,but also debt management responsibilities.Local governments have made some explorations about it in recent years.Central government should grant legal borrowing right to local governments,but the debt amount and its using should be strictly controlled.The uniform management agencies should also be set up in Ministry of Finance and public finance departments at province,city and county.

Zou Jiang-ta

During the reform of fiscal decentralization in our country,local governments turn to relatively independent public sector gradually.In our existing institutional arrangements,as the implicit guarantees taken by central government suffer from the problem of incentive incompatibility,the resulting moral hazards will lead to even higher fiscal risks.On the precaution of moral hazards in local governments,we should set up risk-control mechanism and perfect the existing fiscal system.

W. Bartley Hildreth

As China and other countries seek to decentralize the financial practices of their sub‐national governments, designing relevant institutions and rules looms as a major policy issue. The purpose of this paper is to clarify the capital market behaviour of Canadian provincial and municipal governments (PMGs), given their financing choices, and to draw relevant comparisons to American state and local government (SLG) debt financing practices. After identifying relevant elements of the federalism structure in the two countries, the paper compares the institutional rules and roles that comprise the capital acquisition behaviour of sub‐national borrowers. The paper concludes by highlighting key points of difference in this important area of fiscal federalism. Both Canada and the United States can present their market‐oriented approaches to subnational financing as a positive foreign policy force.

Andreas Kopp

Historically, infrastructure funds have been strongly debated for infrastructure policies in developing countries. With fiscal austerity and tighter budgets, off government budget cost recovery mechanisms raise interest for the infrastructure policies of rich countries as well. The paper will explore the economic and political rational for infrastructure funds. It will argue that infrastructure funds may be considered to be a mechanism to avoid failures to coordinate between different interests in transport infrastructure policies, leading to distorted infrastructure policies and a waste of resources by political players. Infrastructure policy without politics. In a first part the paper will set the classical public finance arguments on optimal capacity choice and finance of indivisible but congestible goods like infrastructure facilities. It will be shown that in this idealized world, where governments perfectly aggregate the preferences of the infrastructure users and taxpayers, a centralized budget process and a decentralized quasi-market for infrastructure services (like an infrastructure fund) lead to identical outcomes. It will be shown that this outcome depends on assumptions on the feasibility of counterfactual tax and transfer policies. In practice, substantial differences are observed between planned expenditure levels for transport infrastructure, for new investment and particular for maintenance. A dominant explanation of this gap is the weakness of transport policy relative to other portfolios in the policy decision making process. Lobbying and infrastructure policies. Isolating the influence of special interest groups in the political process, the paper will show that, if governments seek campaign contributions and a high share of votes of the population, the lobbying activities lead to a political outcome that is identical to the infrastructure policy in the absence of lobbying activities. That is, the lobbying parties are caught in a prisoners' dilemma from which they would want to withdraw could they do so unilaterally. Wasteful but inconsequential lobbying continues, however, as the lobbying parties fail to coordinate to withdraw from influencing the outcomes of the budget process. The existence of infrastructure funds would enable the society to save the resources wasted in rent seeking activities. Lobbying and the entry of citizen-candidates. In the context of a mobile party structure, where citizen-candidates with own policy profiles might enter party politics, lobbying might lead to a reaction of candidatures for political offices that lead even to a worse outcome for the lobbying contenders than in the case of an agreed abstention from lobbying. In this case, a coordination not to lobby between special interest groups would lead to the avoidance of resources spent in rent seeking activities, a distortion of infrastructure investment and maintenance levels from inducing countervailing party positions and a loss of income of the lobbying parties. Benefits transport infrastructure funds. The paper will argue that establishing transport infrastructure funds can be considered a solution to the distorting influences resulting from lobbying and induced reactions in the party system on infrastructure policy. An initiative to establish infrastructure funds could enable lobbying parties to escape the prisoners' dilemma of being unable to coordinate. For the covering abstract see ITRD E135582.

Kathleen S. McArthur

ACILITATING urban infrastructure development and promoting the growth of local capital markets are among the most important development objectives for Latin America.For the most part, however, multilateral development organizations such as the World Bank and the Inter-American Development Bank (IDB) have addressed these two development issues separately.Multilateral-sponsored infrastructure development initiatives have focused primarily on providing technical assistance, equity grants, and subsidized bank loans, while capital markets development initiatives have consisted largely of policy-based advising and advocacy of structural reforms.'This Note proposes the use of multilateral-sponsored, local-currency municipal bond insurance to the most credit-worthy Latin American municipalities as a more leveraged, holistic approach to promoting development.Of the few multilateral-sponsored credit guarantee programs that have been implemented, most are designed for private capital investments and, in limited circumstances, sovereign debt securities. 2 A multilateral-sponsored municipal bond insurance program could reduce municipalities' financing costs for specific projects and encourage decentralization within the region, while simultaneously promoting the growth of domestic capital markets by encouraging greater reliance on these markets by Latin *J.D.

Fredérić Docquier, Oliver Paddison, Pierre Pestieau

No abstract is available for this record.

Jorge Martínez-Vázquez, Baoyun Qian, Shuilin Wang, Heng‐Fu Zou

No abstract is available for this record.

Liu Feng

Unbalanced distribution of regional openness is a factor causing regional divergence. This paper analyzes the mechanism on foreign trade from financial aspecl and discusses financial development framework under fiscal decentralization. It is found that:(1) financial improvement is beneficial to regional openness; (2) regional government intervention on financial system does harm to foreign trade; and (3) informal finance in some regions is beneficial to export development.

John William Hatfield

We show that federalism will lead to higher economic growth. We present a model of endogenous growth where government services, funded by income and capital taxes, are a component of production. In this model a decentralized government will choose tax policy to maximize economic growth, while a centralized government will not do so. Furthermore, these conclusions hold regardless of whether the government is beholden to a median voter or is a rent-maximizing Leviathan. However, a decentralized government will under- provide a consumptive public good. Finally, we show our results are robust to imperfect capital mobility between districts and in such a model that districts with a lower total factor productivity will choose a more growth-enhancing tax policy.

Julio López Laborda, Carlos Monasterio Escudero

This chapter provides an overview of the key issues in public economics arising from the process of territorial decentralization that has taken place in Spain since the restoration of democracy and ratification of the Constitution of 1978, which resulted in the emergence of the “ Autonomic State ”. The first section of this chapter focuses on the assignment of competencies between central and regional levels of government and explains in detail the methodology used to quantify the “effective cost” of the services devolved to the Autonomous Communities (hereinafter ACs). We have paid special attention to health services, which are the most significant item for regional budgets in quantitative terms. The second section deals with revenue assignment and describes the two systems established to finance regional expenditures. These two systems are the “ordinary system” (régimen común), which is applied in the majority of the ACs, and the “charter system” (régimen foral), which is based on the historical rights accorded to the Basque Country and Navarre . The last section gives an appraisal of the decentralization process and notes some emerging issues of debate.

Ehtisham Ahmad, Mercedes García-Escribano

There is increasing interest in fiscal decentralization in Peru as a mechanism to generate more involved decision-making at the subnational level. This is tempered with a continuing emphasis on overall fiscal stability. However, considerable work needs to be undertaken to define more clearly expenditure responsibilities and financing mechanisms that increase local accountability. In addition, a more transparent fiscal transfer system is needed, together with clarity in expenditure management at all levels of government. The paper suggests that a substantial work agenda is needed to extend the decentralization process with greater transparency.