Based on the provincial panel data,this paper analyzes the effect of the decentralization of education finance on the output of compulsory education.It comes to the following conclusions: firstly,the decentralization of education finance between central and provincial governments has no significant effects on the total output of local compulsory education,but has significantly positive effects on the output of urban compulsory education and negative effects on the output of rural compulsory education;secondly,the decentralization of education finance between provincial governments and governments under provincial level has significantly negative effects on the output of urban and rural compulsory education;thirdly,fiscal input into education has no significant effect on the output of urban compulsory education,but has significantly positive effect on the output of rural compulsory education.It states that China should increase the central fiscal input into rural compulsory education,and the decentralization of education finance at provincial level is conducive to the increase in the output of urban compulsory education.
In the discourse of local government law, the idea that a mobile populace can âvote with its feetâ has long served as a justification for devolution and decentralization. Tracing to Charles Tieboutâs seminal work in public finance, the legal-structural prescription that follows is that a diversity of independent and empowered local governments can best satisfy the varied preferences of residents metaphorically shopping for bundles of public services, regulatory environment, and tax burden. This localist paradigm generally presumes that fragmented governments are competing for residents within a given metropolitan area. Contemporary patterns of mobility, however, call into question this foundational assumption. People today move between â and not just within â metropolitan regions, domestically and even internationally. This is particularly so for a subset of residents â high human-capital knowledge workers and the so-called âcreative classâ â that is prominently coveted in this interregional competition. These modern mobile residents tend to evaluate the policy bundles that drive their locational decisions on a regional scale, weighing the comparative merits of metropolitan areas against each other. And local governments are increasingly recognizing that they need to work together at a regional scale to compete for these residents.This Article argues that this intermetropolitan mobility provides a novel justification for regionalism that counterbalances the strong localist tendency of the traditional Tieboutian view of local governance. Contrary to the predominant assumption in the legal literature, competition for mobile residents is as much an argument for regionalism as it has been for devolution and decentralization. In an era of global cities vying for talent, the mobility case for regionalism has significant doctrinal consequences for debates in local government law and public finance, including the scope of local authority, the nature of regional equity, and the structure of metropolitan collaboration.
The article builds public goods provision comprehensive evaluation index,using the two-step system GMM estimation method,based on the Chinese city dynamic panel data to analyze the impact of fiscal decentralization and fiscal on public goods provision.The results show that land finance significantly reduces the quality of public goods provision,while fiscal decentralization helps to improve the quality of public goods provision.Further study found that the land finance promotes the economic public goods provision.But it has an obvious inhibitory effect on the economy of non-economic public goods provision.In addition,land finance impact on the public goods provision significantly differs from spatial and temporal,land finance promotes the east public goods provision increased,and then decrease the public goods provision in the central and western regions; As the land clinch a deal the price increased dramatically,land finance the negative impact on the public goods supply has improved significantly in 2004.
This paper uses cross-national data to examine the effects of fiscal
decentralization on educational outcomes in OECD countries. Measures of both
expenditure and revenue decentralization are included, in order to account for
the different dimensions of decentralization. Our estimated results show that the
decentralization of education expenditure responsibilities has a positive effect on
educational outcomes. These positive effects will be higher the higher the
autonomy of subcentral governments to decide on the different aspects of the
education system, and the lower the percentage of their expenditure that is
financed with conditional grants. In fact, positive effects of education
decentralization could be offset if a high percentage of the subcentral
government expenditure is financed with conditional grants from higher levels of
government. In addition, we find that the effect of expenditure decentralization
is higher the higher the percentage of taxes which are collected at the subcentral
level of government, i.e. when subcentral governments are held accountable for
taxing decisions.
With decentralization and urbanization, the debts of state and local governments and of quasi-public agencies have grown in importance. Rapid urbanization in developing countries requires large-scale infrastructure financing to help absorb influxes of rural populations. Borrowing enables state and local governments to capture the benefits of major capital investments immediately and to finance infrastructure more equitably across multiple generations of service users. \n \nWith debt comes the risk of insolvency. Subnational debt crises have reoccurred in both developed and developing countries. Restructuring debt and ensuring its sustainability confront moral hazard and fiscal incentives in a multilevel government system; individual subnational governments might free-ride common resources, and public officials at all levels might shift the cost of excessive borrowing to future generations. \n \nThis book brings together the reform experiences of emerging economies and developed countries. Written by leading practitioners and experts in public finance in the context of multilevel government systems, the book examines the interaction of markets, regulators, subnational borrowers, creditors, national governments, taxpayers, ex-ante rules, and ex-post insolvency systems in the quest for subnational fiscal discipline. \n \nSuch a quest is intertwined with a countryâs historical, political, and economic context. The formal legal framework interacts with political reality to influence the dynamics of and incentives for reform. Often, the resolution of a subnational debt crisis unfolds in the context of macroeconomic stabilization and structural reforms. \n \nThe book includes reforms that have not been covered by previous literature, such as those of China, Colombia, France, Hungary, Mexico, and South Africa. The book also presents a comprehensive review of how the United States developed its debt market for state and local local governments through a series of reforms that are path \ndependent, including the reforms and lessons learned following state defaults in the \n1840s and the debates that shaped the enactment of Chapter 9 of the Bankruptcy \nCode in 1937. Looking forward, pressures on subnational finance are likely to continueâfrom the fragility of global recovery, the potentially higher cost of capital, refinancing risks, \nand sovereign risks. This book is essential reading for anyone wanting to know the \nchallenges and reform options in debt restructuring, insolvency frameworks, and \npublic debt market development.
The objective of this study was to explore the impact of decentralization of central government functions to local authorities in Tanzania. The study involved a sample population of 50 people and data were collected from primary and secondary source of data. The objective of this research was to explore the impact of decentralization of Central Government functions to Local authorities in Tanzania. There are four Specific Objectives to this study. This study used the descriptive type of research and the findings addressed the research questions. The study came with the following findings; the decentralized functions have good impact on decision-making through structured meetings, people are involved in planning and budgeting process by 75%. Resources such as finance and manpower are managed by people at grass root and revenue collection is done by the local authorities. The study concludes that the decentralized functions have impacts on autonomy of local authorities, increased control of financial and human capital by local authorities hence increase of performance, transparency and good governance in local authorities. The study came with recommendations for improvements as follows; the capacity building should be strengthened to extension officers and local leaders. Local leaders should identify their roles and obligations. Also they should provide full autonomy and authority without interference to local authorities in areas of plans and budgets. The central government should leave some revenue sources to local authorities which are collected by central government. There should be non-interference of central government in decision-making to local authorities by District Commissionersâ office and Regional Secretariat. There should be harmony between councillors and management to avoid unnecessary conflicts.
This paper studies the political economy of pricing and investment for excludable and congestible public goods in a federal state. Currently, we observe a wide variety of practices, ranging from federal gasoline taxes and road investment to the local supply of -- and sometimes free access to -- libraries, parking spaces and public swimming pools. The two-region model we develop allows for spill-overs between regions, it takes into account congestion, and it captures both heterogeneity between and within regions. Regional decisions are taken by majority voting; decisions at the federal level are taken either according to the principle of a minimum winning coalition or through cooperative bargaining. We have the following results. First, when users form the majority in at least one region, decentralized decision making performs certainly better than centralized decision making if spill-overs are not too large. Centralized decisions may yield higher welfare than decentralization only if users have a large majority and the infrastructure in a given region is intensively used by both local and outside users. Second, if non-users form a majority in both regions, centralized and decentralized decision making yield the same socially undesirable outcome, with prices that are much too high. Third, both bargaining and imposing uniform price restrictions across regions improve the performance of centralized decisions. Fourth, the performance of decentralized supply is strongly enhanced by local self-financing rules; it prevents potential exploitation of users within regions. Self-financing rules at the central level are not necessarily welfare-improving. Finally, the results of this paper contribute to a better understanding of actual policy-making.
This paper selects potential proxy variables of public preference, analyzes the impact mechanism between public preference and social security expenditure, and focus on the relationship among fiscal decentralization, public preference and social security expenditure by using provincial panel data (1998-2006). The result shows that fiscal decentralization measured by different indicators is significantly correlative with fiscal social security expenditure and exists spatial heterogeneity. The decentralization of fiscal revenues and degree of fiscal self-financing are significantly negative with social security expenditure, while the decentralization of fiscal expenditure is significantly positive with social security expenditure. The potential proxy variables of public preference are less significantly with local governmentsâČ social security expenditure behavior, which suggests the fact that the vertical social security expenditure mechanism is yet responded affectively to social pension voices.
This article reflects some results of the work undertaken by the expert working group on optimization of public expenditures in the area of governance which contributed to the overall efforts on evaluating efficiency of the federal budget expenditures and forming recommendations on the optimization of such expenditures in 2013. This evaluation was conducted jointly by the Russian Academy for National Economy and Public Administration (RANEPA) and National Research University â Higher School of Economics (NRU-HSE) in cooperation with the Ministry of Finance, Ministry of Economic Development, and other federal authorities. The article is focused on the influence of decentralization policies on the efficiency and effectiveness of public spending both in a broad context and in one, based on the practice of delegating some federal powers to the constituent entities (regions) of the Russian Federation. Analysis of the federal budget execution data as well as some public sectorsâ statistics demonstrates that the practice of delegation of the Russian Federationâs powers to the sub-national level which was accompanied by relevant budgetary transfers (subventions) has led to an excessive growth of the federal budget expenditure on the relevant areas (as compared to the GDP growth for the same period and the growth of the federal budget expenditures on the public administration as a whole). At the same time âat least in the selected cases âthe efficiency and effectiveness of public spending, including performance outputs have decreased aft er the delegation of powers took place. Decentralization based on the delegation of powers has also resulted in new functions aimed at controlling the effectiveness of the delegated authoritiesâ performance. As a result, total administrative costs have increased. Given these conclusions it is recommended to switch from the practice of delegating authority to the practice of reallocating certain powers among the levels of government with a parallel reallocation of the budget revenue sources. Such a reallocation should be based on a detailed profound review of the efficiency and effectiveness of decentralization in each particularsector, with both the options of further devolution and recentralization being considered.
This paper shows that the inefficiency of fiscal decentralization in the presence of spillovers, a main tenet of the decentralization literature, is overturned in a particular transportation context. In a monocentric city where road (bridge) capacity is financed by budget-balancing user fees, decentralized capacity choices (made by individual zones within the city) generate the social optimum despite the presence of spillovers. This conclusion is closely tied to the famous self-financing theorem of transporation economics.
Chinese local governments have obtained incremental land by continuous city expansion and infrastructure investment, and have consequently acquired large amounts of land granting revenue. Based on a theoretical analysis framework, this paper explains the impact of Chinese style decentralization on local government behavior. Because the fiscal decentralization weakened the decision and distribution right of local government revenue or expenditure, the pressure of the gap between local government revenue and expenditure has grown. This research provides a new perspective for understanding the deviation of land granting prices and will help develop policy to regulate the behavior of local governments. We conducted an analysis using prefecture-level panel data from 1999 to 2009 for the Yangtze River Delta region. The results showed that Chinese style decentralization has significant incentives on the land finance of local governments. Fiscal decentralization was found to have a positive effect on the increase of industrial, commercial and residential land prices; political centralization was found to have a positive effect on commercial and residential land prices. In conclusion, the land finance tendency of local governments and deviations in land granting price have a close relationship with institutional arrangements of Chinese style decentralization.
The current system of fiscal decentralization in China has a number of serious problems. Whereas it has clearly assigned revenues between the central government and provincial governments, the current system does not provide clear expenditure assignments for almost all levels of governments. In practice, the widely unfunded responsibilities have been taken up by local governments, in particular, by the governments at and under county level. Since 1994, the responsibilities for these local governments have continued to expand. On the other hand, the âtax sharing reformâ of 1994 led to a very limited tax bases for local governments. In fact, a significant amount of local governments in China face serious fiscal crisis.
Virtual currencies are online payment systems that may function as real currencies but are not issued or backed by central governments. As demonstrated by recent events, virtual currencies present regulators with significant challenges. On May 23, 2013, the U.S. federal government brought an indictment against the operators of Liberty Reserve, a popular virtual currency, charging the operators with money laundering and operating an unlicensed money-transmitting business. The same month, the Government Accountability Office ("GAO") made public a report exploring the potential tax-compliance risks associated with virtual currencies and economies. Legislators have also taken particular interest in one type of virtual currency-Bitcoin. On August 13, 2013, the U.S. Senate Committee on Homeland Security announced plans to start an inquiry aimed at establishing a regulatory framework for Bitcoin. This short Essay describes the mechanisms by which "cryptocurrencies"-a subcategory of virtual currencies-could replace tax havens as the weapon-of-choice for tax-evaders. I argue that it is reasonable to expect this shift to occur in the foreseeable future due to the contemporary convergence of two unrelated, yet parallel, processes. The first process is the increasing popularity of cryptocurrencies, of which Bitcoin is the most widely recognized example. Unlike other virtual currencies that are associated with the existence of a virtual economy-usually in computer games-cryptocurrencies "function as a unique currency with [their] own free-floating exchange." Over the past three years, Bitcoin gradually gained the confidence of consumers, retailers, and service providers, and it is now effectively functioning as a currency in the real world. In fact, in August 2013, Bitcoin was officially recognized as a legal form of tender in Germany. Only two weeks earlier, a federal judge ruled that for purposes of U.S. securities regulation, Bitcoin is indeed "money."
Abstract This article elaborates on the understanding of New York's public fiscal position. The choice of counting rules has a dramatic impact on the understanding of the size of government and interpretation of its fiscal health. The decentralized character of New York's public fiscal position derives from impacts of policy practices in four key areas: social welfare, education, public employee pensions, and collective bargaining. Debt is both a useful and respected tool of public finance and a dangerous temptation for elected officials. New York is among the most heavily indebted states in the nation. With respect to Medicaid and public assistance, the City of New York and virtually all counties favor increased state financing. The area with the greatest potential for change is the heavy decentralization of public fiscal matters in New York.
Gives an overview of the decentralization process in Kenya which has experienced little change since independence with the exception of Local Authority's (LA) responsibilities and resources which have been recentralized. The Kenya Local Government Reform Program (KLGRP) tried to correct this by increasing the LAs' financial resources, fostering citizens' participation in community life, and improving reliability of budgetary and accounting information. A new constitution was adopted in 2010 which reforms national institutions and intends to change the system of territorialized public institutions, but leaves issues of operation and financing of the new system unresolved. Currently, LA's freedom in regard to expenditure and revenue is extremely limited, but many of them do not comply with those rules. Principal elements of local taxation are the single business permit, property rates, contribution in lieu of rates (CILOR), and agricultural taxes. Even if the Local Government Act amendments bring changes for the current LAs, the new constitution maintains a centralizing tone.
Outlines decentralization in Senegal beginning with independence and later with the transfer of powers to the regions, communes, and rural communities (collectively known as CTs) through legislation that defines the missions and competences of the CTs, their organization, functioning, and oversight. The budget, prepared annually by the CT's elected executive, includes a classification of expenditures and revenues by type; however, there is confusion between the two classification systems and in the investment expenditure column. Most of the responsibilities transferred to the CTs concern education and health and though the law does not always require them to perform these responsibilities, it mandates the budget to include expenditures for them. Local resources include taxes, levies, property income, and user charges and fees; but tax revenues are always late and incomplete, and the identification of the tax base suffers from inaccuracies causing substantial abatements. Many intergovernmental transfers take place, but their total amount is modest compared with other local resources.
Provides an overview of the framework for an analytical method created to provide country studies of Burkina Faso, Ghana, Kenya, and Senegal to address the historical and institutional design of decentralization as outlined in each country's national constitution or legislation through the use of an institutional study and a field study. The six steps in this process assess: (1) the institutional approach to decentralization, its design, and any gaps between the institutional norm and the reality on the ground; (2) the decentralized budget which provides a benchmark for comparing the financing systems of the countries studied; (3) the assignment of responsibilities across levels of government; (4) the revenue structures and systems and financial autonomy of local authorities; (5) the financial transfers through intergovernmental grants to support local governments; and (6) statistical data which can be used to measure the decentralization of responsibilities and resources.
The literature on federalism often evokes an association between redemocratization and decentralization, in which the consolidation of democracy is associated with a strengthening of federalism and a trend towards administrative, political and fiscal decentralization (Souza, 1999). The fact that this is driven by the need to provide resources and supply better-quality public services, makes analysis of the distribution of social spending highly relevant. Accordingly, the aim of this chapter is to analyze the trend of social spending in Latin America. Several Latin American countries have been pursuing an intensive process of fiscal decentralization over the last two decades; and, at the same time, almost the entire region has made changes to its social policies. These two processes reflect, first, the desire to generate allocation efficiency gains, which have an impact on expanding the decision-making, fiscal, and financial autonomy of local governments; and, second, the desire to strengthen democracy. The latter has had repercussions on social policy actions and services, generating broader coverage and higher monetary benefits, together with improved access, expansion of coverage, and the decentralization of jurisdictions and resources for service provision. In some countries, decentralization was seen as a way to resolve institutional problems caused by a loss of resources and the ability of federal governments to finance social policies and restructure service provision, while at the same time adapting to the growing importance of local areas in federative resource sharing and autonomous governance.
We study the effect of fiscal decentralization on economic growth for twenty-three Organisation for Economic Co-operation and Development countries from 1975 to 2008. In order to proxy fiscal decentralization, we use both traditional Government Finance Statistics (GFS)âstyle measures and new measures that account for the degree of subnational tax autonomy. The regressions with GFSâstyle measures indicate that fiscal decentralization has a negative but statistically insignificant effect on growth. Regressions with the new measures also result in negative coefficient estimates. However, they are larger in absolute terms and statistically significant. For the empirical literature on fiscal federalism, these results imply that measures of fiscal decentralization that account for subnational tax autonomy should be preferred to traditional GFS-style measures. From a policy perspective, we conclude that policy makers should be aware of the economic trade-offs when pursuing reforms toward more fiscal decentralization.
Abstract Making use of the data envelopment analysis (DEA) technique and taking undesirable fiscal phenomena into account, this paper comprehensively quantifies the public finance performance of local governments in China during the course of fiscal decentralization reform. The introduction of undesirable fiscal outcomes into this assessment makes it possible to identify meaningful and informative characteristics of local public finance performance in China. When reforms are first implemented, local public financial performance improves because undesirable fiscal phenomena have not yet become too serious. The tax sharing system reform did not work well in its early stages, and negatively impacted public expenditure efficiency. The reform started to play a substantial role between 2001 and 2005, when local governments experienced better public finance performance. Corresponding to the deterioration of the financial sector in recent years, local public financial performance worsened after 2007. Further reform of the current fiscal and taxation system is necessary in China, to ensure a brighter future for the nation.
Fiscal decentralization has gained support by most of the worldâs leading development organizations including the World Bank, United States Agency for International Development and, Asian Development Bank among others in the last two to three decades. It is therefore of much importance that some form of thought is given to the operations of this system to make it more beneficial. Drawing selectively on large academic and practical literature on fiscal decentralization and the articles in this volume, this article outlines the state of fiscal decentralization in current times. It then goes on to outline some key arguments in favor of and against fiscal decentralization as a system of government. The theoretical framework of fiscal decentralization is also discussed in this article with regards to the stabilization, distribution and allocation functions. An overview of this system of government so far as Ghana is concerned has also been touched on with much emphasis on the legal framework and the key sources of finance for subnational governments. Finally, a number of factors for improving and making this system more beneficial and sustainable over time are identified.
Abstract Significant developments of US state and local finance are converging in a manner that will newly frame the practices of state and local governance in the next decade and beyond. These trends can move from low-priority âproblems to be addressedâ to becoming urgent, high-priority concerns when the governments face economic and political shocks that are beyond their direct controlâfor example, the Great Recession (2007â2009). In this context, this article offers to bring together in the book the existing knowledge on the principles and practices of state and local finance. It takes an explicit look at how the issues proposed to be addressed fit into the broader framework of the practice of US intergovernmental relations (fiscal decentralization). The organization of the book is explained.