This book presents a comprehensive, theory-based analysis of Japanâs public sector. Particular emphasis is directed at developing tools that can be applied to theoretically and empirically clarify essential economic concerns in Japanâs public sector. These include macroeconomic incidence of fiscal decentralization, dependence on government bonds for covering financial deficits, and social security reform. In analyzing Japanâs underperforming public sector, the authors develop and recommend policy solutions aimed at achieving Japanâs growth potential, improving the quality of the public sector, and strengthening the sectorâs contribution to the Japanese economy.
This book presents a comprehensive, theory-based analysis of Japanâs public sector. Particular emphasis is directed at developing tools that can be applied to theoretically and empirically clarify essential economic concerns in Japanâs public sector. These include macroeconomic incidence of fiscal decentralization, dependence on government bonds for covering financial deficits, and social security reform. In analyzing Japanâs underperforming public sector, the authors develop and recommend policy solutions aimed at achieving Japanâs growth potential, improving the quality of the public sector, and strengthening the sectorâs contribution to the Japanese economy.
Federalism research has recently seen a downright renaissance by putting the question âDoes federalism matter?â on centre stage (Kaiser 2004). Findings in this respect are, however, ambiguous so far. Some authors observe a positive influence of federalism on lower inflation rates (Lijphart 1999; Lancaster/Hicks 2000), lower unemployment (Crepaz 1996), or a higher economic growth (Lancaster/Hicks 2000), whereas other researchers do not find any effects of federalism with regard to the macroeconomic performance of political systems (Lane/Ersson 1997; Castles 2000).p1 In addition to disputed findings and a preference for case studies instead of comparative research, there is next to no theoretical argument in these contributions as to why federalism should or should not have consequences for policy output. Against this background, the history of federalism research has a surprise in store. The question of performance effects of federalism refers back to Ostrom (1973) who turns against Rikerâs (1969) claim that federalism (apart from more complicated decision-making) makes no real difference. Ostromâs argument rests explicitly on findings of the public finance literature (in particular Oates 1972) and the assumption that federal countries can fully exploit the advantages of a decentralized provision of public goods and services. It is therefore rather startling that federalism literature has, for the most part, neglected the dimension of economic decentralization, the more so as there appears to be no alternative basis for the purported performance effects of federalism.p2
The origin of modern state is taxation.Tax state is a mixture of taxes in modern area which has the character of public price and non-profit-making,and democracy and rule-of-law of modern state.Tax state should be reflected in the aspects of public goal and national goal.If there is no tax state,the real state-ruled-of-law which takes economic liberty as its centre will be impossible.Tax state must build a structure which will complete the rule-of-law.Taking tax state's principle of legalism,egalitarian and human rights which stem from democracy of finance as a derivation,we should perfect the system of fiscal constitutionality,fiscal decentralization of authority and correlative procedures and set a basic boundary for the operation of tax state.
Decentralization of public responsibilities implies also financial decentralization. The effect of this process in EU countriesâ budgets is important to be evaluated in order to correlate with macroeconomic indicators. From financial point of view, local revenues and expenditures and the balance of local budgets constitute the main research theme. Different experiences and realities reached under the same normative framework (European Charter of Local Self-Government) are analyzed in this paper.
This article empirically examines the interaction mechanism between fixed capital formation and government investment in an intertemporal framework,employing data on China and Japan.We found that although China and Japan both implement fiscal decentralization,the respective mechanisms through which economic development and investment are boosted are quite different.While correlation between the growth rate of GDP and capital formation is weak in Japan,its central government investment stimulates the formation of capital.In China,local governments have played an irreplaceable role in the formation of public and fixed capital.The paper makes a comprehensive and comparative study of the fiscal systems in China and Japan in terms of the demand,supply,financing and efficiency of public investment.The better performance of Japan's public investment should be attributed to its effective incentive mechanism,under which local governments are encouraged to invest to build good infrastructure for economic growth.
The process of gradual administrative and political decentralization in Bulgaria started in 1991 with the adoption of the Local Self-Government and Local Administration Act, but the real financial decentralization process started in the beginning of 2003 with the adoption of a comparatively clear expenditure assignment and introduction of a transparent and predictable intergovernmental transfer system. Basically, a key issue in the design of fiscal federalism is the financing of subnational governments. Because of the advantages of taxation at the central level and spending at the decentralized level during the transition period Bulgaria has often ended up with vertical and horizontal fiscal imbalances. In most of the fiscal years the decentralization of expenditures was not accompanied by equivalent revenue-raising responsibilities and the taxable base was unevenly distributed within the country territory. The purpose of this paper is to study and critically analyze the financial decentralization reform in Bulgaria, outlining the key achievements and basic weaknesses of the local taxation and the intergovernmental fiscal relations. Key words: financial decentralization, local finance, intergovernmental fiscal relations, local
In this paper the author investigates the effect of regional finance on economic disparity and the effect of fiscal decentralization though using panel data analysis to analyze 28 provinces' statistics from 1990 to 2004. The results show: in the east region and west region the financial development has a positive effect on the regional economic growth. But in the middle region and northeast region the financial development has a negative effect on the regional economic growth. The effects of fiscal decentralization on the financial development and economic growth are different in different regions. Its positive effects are only found in West and Northeast. At the same time the author also thinks over how the factors such financial policies and the degree of denationalization affect the relation of financial development and regional economic growth. At the last there are the conclusions and policy proposes to coordinate regional economic from the aspect of regional finance.
Decentralization reforms in CEE countries have been an essential component of the overall transformation process that took place after the collapse of the former communist regimes. It entered public thought as a panacea to the political, economical and social problems that emerged because of and during the transformation. It also featured prominently in social policy reforms, particularly in the case of social assistance. Local government involvement in the financing and administration of social assistance schemes has been widely promoted by various international organizations as holding the key to reducing the financial cost of such schemes through improved targeting. However, the theory of fiscal federalism provides us with sound theoretical arguments against decentralization of social assistance. According to this theoretical framework, fundamental constraints on redistribution by lower level governments would negatively affect the generosity of poverty relief systems and facilitate a ârace to the bottomâ.
The paper puts forward the theory of fiscal decentralization and the superiority of the basic point of view by illustrating the theoretical development of the financial decentralization of the sort sequence. China's financial system is at a critical stage of reform and development. Between central and local governments into financial terms and the exercise of reasonable design of the system still exist,issues such as lack of incentive mechanism. The West by studying the theory of fiscal decentralization at all levels of government will help improve the financial efficiency and effectiveness of behavior,and promote national economic and social development.
The work paper highlights the evolution of the public financial decentralization in Romania, based on analysis of legislative changes that occurred after 1991.These changes have had an important impact on local budgets and on local government responsibilities. In the context of increasing local financial independence, local authorities had to demonstrate their ability to take on the tasks of local interest from central government powers. The effect is prompt and timely response to citizen needs.
Informal payments are a frequently overlooked source of local public finance in developing countries. We use microdata from ten countries to establish stylized facts on the magnitude, form, and distributional implications of this "informal taxation." Informal taxation is widespread, particularly in rural areas, with substantial in-kind labor payments. The wealthy pay more, but pay less in percentage terms, and informal taxes are more regressive than formal taxes. Failing to include informal taxation underestimates household tax burdens and revenue decentralization in developing countries. We propose a simple model of information and enforcement constraints that parsimoniously explains the patterns in the data.
Post-1991 Decentralization reform in Ethiopia reveals that regional governments have technically separate power to self administer their regions, formulate and implement their socio-economic policies and strategies, bear all financial expenditures, raise revenue from specified tax bases, get subsidies from the central government and borrow from internal sources. The implementation of the reform, however, shows sustained central government dominance on expenditure and revenue assignment, continued regional dependence on central subsidy, absence of borrowing, and sustained central government interference in the administrative affair of regions. By conducting detailed field research in three regional governments, this article exposes how public sector management system (public finance and human resource management system) determines decentralization outcomes. It contends that outcomes of decentralization reforms are shaped not only by political and economic factors, as suggested in the decentralization literature, but also by the de facto public sector management system.
The objective of the three essays of this doctoral dissertation is to investigate the strategic choices of organizational forms by competing firms in various environments. The first essay, which is a joint work with Professor Guofu Tan, provides an alternative theory of divestitures that relies on product-line complementarities and product market competition. We consider a simple environment in which there axe two firms, each supplying a group of complementary products and the products across groups axe imperfect substitutes. We model the firms' choices of divesting and pricing as a two-stage game. The duopohsts simultaneously choose their divestiture strategies in the first stage of the game and the independent divisions compete by setting prices in the second. It is shown that, when competing with each other, firms with complementary product-lines have incentives to split into multiple independent divisions supplying complementary products and services. Such divestitures increase prices and the parent firms' values but reduce aggregate social welfare. Moreover, the degree of divestiture, as we illustrate in the linear demand case, depends on the severity of competition and the nature of product-lines. Then, intensified competition due to deregulation, trade liberalization and entry may trigger divestitures. We further show that if two firms axe able to coordinate their divestiture strategies, they can achieve the joint monopoly prices and profits in a non-cooperative price game. The second essay analyzes the strategic incentive of oligopolists to create autonomous rival divisions when products are differentiated. We consider a two stage game where firms choose the number of autonomous divisions in the first stage and all the divisions engage in Cournot competition in the second. It is shown that product differentiation ensures the existence of an interior subgame perfect Nash equiubrium, and the equilibrium number of divisions increases with the degree of substitution among products and the number of firms. Further, if divisions are allowed to further divide, they always will, which leads to total rent dissipation. Thus, parent firms have incentives to unilaterally restrict their divisions from further dividing. In the free entry equihbrium, it is found that the possibility of setting up autonomous divisions is a natural barrier to entry. Incumbents may persistently earn abnormally high profits. In the cases where product differentiation is difficult, the only pure strategy free entry equilibrium is the monopoly outcome even if the entry cost is relatively low. The third essay develops a game theoretic model to analyze strategic leasing behaviors of landowners in a nonexclusively owned common oil pool. The oil field development is modeled as two more-or-less independent one-stage noncooperative game. The landowners choose leasing strategies in the first stage, and independent lease operators choose extraction strategies in the second. It is found that, in a nonexclusively owned oil field, it is individually rational for a landowner to unilaterally subdivide his landholding and delegate production rights to multiple independent firms, even though more dispersed production control leads to heavier common pool losses. Moreover, the degree of landownership concentration determines the degree of production concentration. The more fragmented the land ownership, the lower is the degree of production concentration i n equilibrium. The analysis offers an explanation for the puzzling landowners' leasing behaviors in U . S . onshore oil fields.
This paper provides an in-depth analysis of the relationship between fiscal decentralization and pro-poor outcomes based on the role of fiscal incentives. The literature on the relationship between fiscal decentralization and pro-poor outcomes is not well established in this area. A conceptual model is developed to explore in more detail this relationship, while endeavoring to illuminate the complexity of the issues involved for policy makers in developing countries. Four types of fiscal incentives are explored: namely, resources, responsibility, autonomy, and accountability. The paper then assesses the effectiveness of the Vietnamese system of fiscal decentralization for achieving pro-poor outcomes through a devolved system of fiscal incentives. The paper suggests that evidence from the Vietnamese case indicates that fiscal decentralization may contribute to poverty reduction outcomes, but does not provide evidence that fiscal decentralization is in and of itself inherently pro-poor. Rather, the lesson from Viet Nam is that if poverty reduction is an explicit objective for government, the system of fiscal decentralization should target pro-poor outcomes through an appropriate system of fiscal incentives. Since 2002, budgetary reallocation and income redistribution linked to poverty outcomes has been more strongly associated with equalizing fiscal transfers than with devolved finances in general. This represents a broadly correct approach to target poverty outcomes in a territorially unbalanced country like Viet Nam. Targeted transfers contribute to pro-poor outcomes by increasing the level of resources available to finance poverty spending. However, increasing the level of fiscal transfers for poverty spending will not ensure that fiscal transfers are then spent efficiently. In order to better realize these efficiency objectives, the government can promote greater fiscal and administrative decentralization of resources and responsibility to district- and commune-level governments. Further gains in this area must also be supported by greater levels of fiscal autonomy and fiscal accountability at the local government level.
The paper examines the progress being made in local finance reforms and indicates pathways to advance those reforms. A summary of the effects of decentralization is given as a contextual background for the discussion of local finance reforms. The inefficient tax assignment has constrained the mobilization of local tax revenues even as local government units have become very dependent on the intergovernmental fiscal transfer, called the Âinternal revenue allotment. The paper raises the importance of revisiting the internal revenue allotment formula. It identifies the local finance reforms currently being undertaken and reports the progress being made at the local and national level. The final section comments on the outstanding issues in local finance reform and gives some recommendations.
This book explores the important topic of fiscal decentralization in Asian countries, and focuses on how government finance and administration are being reformed to bring budgetary decisions closer to voters. The focus on Asia is especially important because all countries in this region have been undergoing serious fiscal reforms in the past decade. They include one of the biggest decentralization reforms in Indonesia, significant reforms in democratic Philippines and Vietnam which are in transition, and Japan, whose fiscal reconstruction program is covered extensively. India and China, which are also covered, are very special cases because of their size and because their policies must fit decentralization into a significant economic growth scenario.
This article summarizes and evaluates two Off-the-Shelf school finance reforms that gained then waned in popularity over the past several years. The 65 percent solution claims that requiring all public school districts to allocate 65 cents of every education dollar âto the classroomâ would drive substantial additional resources to children without increasing total spending, therefore improving the efficiency of public education systems. The 100 percent solution promotes a combination of decentralized school-based governance and budgeting, coupled with a district-to-school budget allocation strategy called Weighted Student Funding. We begin by evaluating the life cycles of these two reforms, concluding that the 65 percent solution has run its cycle, but that the 100 solution remains viable, mainly because it contains potentially more substantive reform elements. We point out that the research literature on productivity and efficiency of public schooling is far from decisive with respect to either shares of dollars allocated to the classroom or decentralized governance, despite bold claims of proponents of the solutions. Finally, we provide a series of empirical analysis and discussions of related research raising additional questions about the central claims of the reforms, including the claim that Weighted Student Funding is a panacea for funding inequities that persist across schools within large urban districts.
Both theory and experience in a variety of circumstances around the world suggest strongly that if fiscal decentralization is to produce sustainable net benefits in developing countries, subnational governments require much more real taxing power than they now have. Students of public finance have studied the subject, and practitioners in developing countries have installed many different versions of subnational government tax. In most developing countries there are potentially sound and productive taxes that subnational governments could use: personal income tax surcharges, property taxes, taxes on the use of motor vehicles, payroll taxes, and even subnational valueâadded taxes and local âbusiness valueâ taxes may all be viable options in particular countries. Still, there is no general consensus about what works and what does not. In this review paper, we try and pull together enough evidence to suggest the way forward. We also develop the argument that given political realities one cannot usually decentralize significant revenues to subnational governments without having in place an intergovernmental transfer system to offset at least some of the disequalizing effects that would otherwise occur. Nor does it make sense to think of decentralizing exactly the same package of tax choices to all subnational governments regardless of their scale and scope of operations.
This book explores the system of financing local governments in selected countries of Central and Eastern Europe. Using evidence from the last two decades, the authors, experts on their particular countries, describe the development of the current local government finance system in each nation, and the major challenges and policy options they face. The contributions in this book provide comprehensive coverage of a transitional Europe that encompasses both modern local public finance theory and specific applications in the target countries.
The quasi-autonomous governmental organization (quago), for which an international definition is difficult to find, is an ubiquitous feature of modem public governance on the national and local levels. This paper, first, examines in general how the number of quagos has increased and what the main reasons are for the expansion. Second, it looks at why the number of quagos increased after Korea implemented the local autonomy system in 1995, when the central government's authority Was delegated to the local governments through political and administrative decentralization. Third, this paper discusses the socio-economic accountability behind the rapid growth of local quagos. It examines problems and solutions regarding administration and monitoring of quagos compatible with optimal control. The recommendations of this paper focus on under what conditions the local quagos perform best.
This book analyzes political decentralization and fiscal federalism in Canada and Germany, both traditional federal countries, and in Spain, a unitarian country engaged in the last two decades in a process of decentralization. Three key issues required for a well designed financing system are analyzed in depth, namely: tax assignment, equalization grants â i.e. redistribution of money from the wealthy regions or the national government to poorer regions, and the role of local governments in the administration of taxes.