The purpose of an article is to compare systems of fiscal decentralization in EU member states according to selected quantitative criteria and European Charter of Local Self-Government principles. The results 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 countries is similar, the shares of funds for the implementation of individual tasks differ significantly. 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 equalization 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.
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 .
The present work aims to study the public finances and the economic behavior of Municipalities alagoanos between the years 1999/2010, using the fiscal and economic indicators commonly used. Therefore, it is considered the theoretical training of Public Finance, the influence of government in the economy to theoretical assumptions about the process of decentralization / centralization in Brazil. The Constitution of 1988 is a milestone in the pursuit of decentralized fiscal federalism, since from that moment, the municipalities now receive the status of a federated entity and had the largest increase in revenues and collection mechanisms itself. Thus, subnational, closer to the wishes of the population could more effectively meet the state's role in the production of public goods and the solution of the demands of the population. However, in the years after the Constitution of 1988, the political changes in the country, especially with Brazil's adherence to the neoliberal project, the advent of the plan and the actual enactment of the Fiscal Responsibility Law, led to a new process of fiscal centralization in Brazil, with consequences for the 5565 Brazilian municipalities. In this context, it is statistically analyzed the finances and economy of the municipalities in Alagoas. The GDP of them indicate the growth of the service sector and centralization of wealth in a small number of cities, as well as the lack of dynamics in small towns, which the government has the primary component in your product. The analysis of municipal finances, with the support of development indicators and the index itself FIRJAN fiscal management, confirm the initial assumptions of the work: the low collection itself, high dependence on federal transfers, effort and compliance with the limits established by LRF for personnel expenses and low levels of investment. Thus, the main findings indicate that the decentralization process of the 1988 Constitution was undermined by the next decade, penalizing the poorest municipalities in case of most in Alagoas.
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.
Decentralization in Indonesia is principally implemented via two laws. Law 32/2004 on Regional Autonomy (original Law 22/1999) restructures the organizational arrangements of the regional government system, with a view to: (1) giving local governments at district and municipal level, greater representation, autonomy and resources; (2) giving emphasis to local knowledge and preferences about development; and (3) providing opportunities for local people to participate in decision making. The companion Law 33/2004 on Fiscal Balance between central and regional governments (original Law 25/1999) focuses on the intergovernmental fiscal system, intending to promote a more equitable distribution of resources, to increase responsiveness and fiscal capacity of local governments at district and municipal level, and to improve social welfare. By their stated objectives, these two laws depict the motives of Indonesia’s ‘Reformasi’ (reform) in 1999, in order to reform a long lasting centralized autocratic regime into a public-participatory democratic system. The outcome of these two key laws on decentralization, and more specifically on the alleviation of poverty, cannot be separated from two features. First, the role of central government transfers to sub-national levels to support the process of decentralization. And second, the commitment of local governments to allocate the resources for developmental purposes and poverty reduction. Although the latter plays a vital role in regards to empowering the poor, the former is equally important as a source of finance to support local governments that are lacking financial competency to perform regional autonomy.
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.
Dubravka Jurlina Alibegović, Sunčana Slijepčević, Željka Kordej-De Villa
The decentralization process started in 2001 by broadening the responsibilities of local self-government units and changing the sources of financing public functions. In spite of these steps toward decentralization, today Croatia exhibits low level of fiscal decentralization compared to EU and SEE countries. In the paper we show that large differences in fiscal capacity between local government units and their large reliance on received grants represent one of the main barriers for further decentralization process. Based on the analysis of the results of conducted interviews with representatives of local and regional units, we present recommendations for further process of decentralization.
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.
This paper aims to asses the transformational impact of EU integrations and e-government on the structure of government and its effectiveness and efficiency. Two examples that are used for the purpose of analysis are the Ministry of Science, Education and Sports and the government agencies that cooperate with it, and the Ministry of Finance, Tax Administration. The first is an example of the agencification model that was stimulated by European integrations in the period from 2001-2009, mainly in order to decentralize decision making and governing of the EU funds. The other example is the cash fiscalization process of Tax Administration, that was stimulated by the processes that started from 2010-2012 and are connected with the need to react to the economic crisis with the onset in 2008 that continued to the present. This process is the opposite to the first one, as it is not the process of decentralization of fund distribution, but of centralization of collection of funds, that is based on cash accounting, not accrual accounting. It can be shown that both processes were stimulated by European integrations and EU fund management, i.e. by the need to increase the collection of funds by governmnet taxing in order to meet the requirements for EU fund programmes and in order to implement European values and reduce corruption. This process is blocked by the lack of trust of citizens in government and the unequal redistribution of collected funds.
Local government is the tier of public authority that citizens first look to solve their immediate social problems. Among all the public institutions at local level, council has a special status and authority as local elected bodies. They are uniquely placed to provide vision and leadership to their local communities. They are able to make things happen on the ground where it really matters. The government of Ethiopia in general and Addis Ababa city administration in particular establishes council at different tiers of government as parliamentary control mechanism to ensure effective policy implementation, promote local democracy and improve service delivery. However, woreda councils in Addis Ababa city administration were not seen playing such role of democracy promotion. Moreover, studies conducted in regional woredas divulged that Woredas council have not yet managed to exercise sufficient local autonomy due to several reasons such as absence of clearly established legal mandate, lack of devolution of power, poor organization of the system and tight control and intervention by higher authorities. Therefore, this study aimed to assess the challenges and prospects that woreda council at Addis Ababa city administration has faced in promoting democracy among grass-root people. It also examines the overall operations of the councils from the viewpoints of democratic government and decentralization In order to pursue the objective of the study the researcher use multi-stage sampling technique and relied on both primary and secondary data source. Primary data collected through questionnaires, interview and observations while secondary data obtained from document analysis like legislation on the issue, minutes and reports complied by counsel's office. It was found that problems prevailed in regional woreda councils are also impeded woreda councils at Addis Ababa City Administration. The internal working system of woreda councils reflected that executive domination is very soaring, and councils are not responsive to the needs of the community and most importantly democratic essence viz. accountability, transparency, participation and autonomy are not adhered principles in the councils conduct. Therefore, councils as they are impeded by the above-mentioned challenges are playing insignificant role in cultivating democratic value and improving the service delivery to the grass root people. Therefore, it is recommended that the internal working system of councils need to be very transparent, responsive, participatory and free from any unnecessary intervention. Councilors must be sensitive to public interest; legal back up from the city administration is also needed in order to make councils strong, autonomous and powerful. The field that councilors operating also should be open to all stakeholders as the democracy promotion works calls for the involvements of different actors
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.
Abstract In the last three decades, China has experienced dual decentralization in transforming its economy, resulting in decentralization and deconcentration in public administration and social service delivery. Under the policy framework of decentralization, particularly when welfare financing has been decentralized to local governments, the emergence of welfare regionalism is evident in China. This paper sets out against this policy context to examine how three local governments in eastern coastal areas in China handle changing labour welfare needs by institutionalizing social and labour protection measures to meet the local needs instead of implementing central policy. With particular reference to examine why regional variations exist in welfare provision even though the socio-economic development status is similar in these areas, this paper shows how different forms of capitals, government's governance style and diversity of industries have affected welfare arrangements for labour in China.
이 연구는 지방분권을 위한 정책수단으로 재정분권이 어떠한 방식으로 이해될 수 있으며, 왜 필요한지에 대해 시스템사고의 이론을 바탕으로 지방재정시스템을 구성하는 변수들의 상호작용관계를 분석하였다. 연구를 통해 얻어진 결과는 다음과 같다. 첫째, 지방재정시스템을 구성하는 변수들은 상당한 수준에서상호작용관계가 형성되고 있으며, 5개의 양(+)의 피드백 루프가 중심이 되어 급속한 성장과 급속한 쇠퇴를 거듭한다는 점을 발견할 수 있었다. 둘째, 지방재정분권화의 타당성에 대한 전략 지점이 인과지도 모델링을 통해 발견되었다. 특히, 선순환구조를 악순환의 구조를 변질시키는 변수(국고보조금, 부동산거래과세, 중앙정부차원의 지방재정조정제도, 지방정부채무 등)이 지속적으로 작동함으로써 지방재정시스템을 쇠퇴시키는 것으로 나타났으며, 이를 바탕으로 전략적 정책과제가 도출 될 수 있었다. 이러한 연구는 지방재정분권에 대해 부분에 지식이 아닌 전체적 지식의 관점에서 지방재정시스템을 이해하고 지방재정의 학문적 폭을 높여 줄 것으로 판단된다. This study analyzes the interaction of variables consisting of the local finance system based on the theory of system thinking regarding how financial decentralization can be understood as the political means for local decentralization and why it is needed. The results gained from this research are as follows: first, variables consisting of the local finance system form interactional relationship in the significant level, and it has been found that rapid growth and rapid decline repeat with five positive feedback loops as the center. Second, strategic points for the validity of local finance decentralization were discovered through causal map modeling. In particular, it has been shown that the virtuous cycle structure declines the local finance system through the constant operation of variables (government subsidies, taxation for real estate transactions, central government's local finance mediation system, and local government debt, etc.) that deteriorate the vicious cycle structure. Based on this, strategic policy tasks were drawn. It is expected that this study will help the understanding of the local finance system and increase academic width for local finance from the aspects of general knowledge, not the knowledge about local finance decentralization.
The objective of this study is explore \n in depth public finance issues and their impact on \n decentralized service delivery at the regional and woreda \n level in Amhara region. The study is carried out as part of \n the federal and some regional case studies designed to \n examine effectiveness of public finances of sub-national \n governments. This study was expected to (i) review the \n institutional arrangement for managing public finances at \n the regional level including policies, budgetary \n institutions, systems and processes; (ii) assess the level, \n trend, and composition of public spending (both functional \n and economic classification) in per capita terms over the \n past five years and identify key achievements and \n limitations; (iii) assess the level, trend, and, composition \n of revenue at the regional level and examine the financing \n framework, including ways to increase local revenue \n generation capacity; (iv) assess the role of external aid in \n supporting decentralized service delivery and the \n sustainability of the program in absence of external aid; \n (v) review the planning and budgeting process as well as the \n quality of PFM system; and (vi) data permitting, establish \n the link between the level of spending and the outputs and \n outcomes for selected sectors. The study used standard \n public financial process review methodologies used for \n undertaking PEFA assessments. The report reviewed the \n various studies, plans and performance reports of the \n various sectors in the regions between EFY 1997 and 2001. In \n addition, key informant interviews were carried out at \n bureaus levels and woreda offices of education, health, \n water, agriculture and rural development, finance and \n economic development, revenue, General Auditor, rural road \n and woreda administrations.
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 )
Ivan Krešimir Lukić, Branka Martic, Berislav Bolfek
Republic of Croatia belongs in group of signifi cantly centralized countries. That means authority to make public decisions including financing system of local self government units (LSGU) is in the hands of the central government. Decentralization process began in year 2001 but central government still procures majority of state revenue and spends the most of the public expenditure. Various aspect research and analysis of fiscal capacities produces data pointing out the problem of inadequate fiscal capacity for providing equal level of public services in all of the local communities as lay down by law. Planning process in LSGU is hampered by absence of legal acts regulating practical role of the local government and administration. Unstable affl uence of finance resources presents significant bottleneck in successful management while uncertainty of financial assets availability prevents many of local governments in detailed planning and execution of any of development measures, within medium-term plan. Within many local units basis of local revenue is too weak for local government to independently carry out development measures.
This paper summarizes the results of a Global Development Network study, carried on by sixteen multidisciplinary research teams and covering thirty developing countries, under the authors general direction, on the effects of different governance structures on the quality and equity of access in three public services: basic education, drinking water supply and roads. Governance reforms analyzed referred mostly to decentralization, formal processes of citizen’s participation and alternative modes of delivery and, within each of them, emphasis was placed on the effects of accountability systems, informational flows and incentive structures. Case studies used both econometric techniques and qualitative analysis based on surveys and structured interviews of policy makers, service providers and users. The impact of governance reforms and alternatives was found to vary significantly with country context, but three major conclusions emerged: 1) Political culture and legacy are the deeper determinants of effective accountability and results. Thus, countries with a history of highly centralized and authoritarian regimes find it harder to make decentralization, participation and competitive modes of delivery work effectively. However, a culture of accountability can be built overtime when adequate institutions and incentives are introduced and maintained overtime; 2) Adequate information flows are not only a necessary condition, but they often promote effective accountability and better results, as they lead citizens and clients to demand accountability and agents to be more responsive to user needs; 3) Self-financing schemes also promote more accountability and better results, as users demand better services when they pay for them and citizens are more demanding (and local authorities are more responsive to their needs) when local taxes finance local services.
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.
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.