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 ā 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.
The collapse or perilous crumbling of our infrastructures, the basic building blocks of the nation's economy, underscores the investment and fiscal policies that confront the nation's leaders as well as the nation's cities' leaders. In this article, the authors focus on one key dimension of the āinfrastructure crisis,ā namely, the critical issues surrounding the financing of city infrastructure and a proposed set of sustainable options available to policy makers, particularly examining trends toward decentralization and fragmentation of governmental and financial institutions and toward market-based and consumer- or customer-oriented policies. Urban policy makers today find themselves in the position of negotiating with neighboring communities, competitive markets, and citizens in a fragmented governance system. What appears to be little more than organized chaos has evolved over decades into the complex, if not always rational, system of infrastructure finance and governance in which cities and other local governments find themselves today.
Since 2000s, the central-local relations in Japan has been confronting a rapid change made by the formulation of the Packaged Decentralization Law and the Trinity Reform. With this background, this study aims to analyse a case of Yubari, Hokkaido in Japan and argue that 'the decentralization reform' in Japan is not consistent with the interests of the local people. For this purpose, the rational choice approach is employed. this study, in particular, examines the preferences of the central government departments such as Prime Minister, Ministry of Finance, Ministry of operation. Ministry of Internal Affairs and Communications as well as the local government. Yubari has been faced with the worst situation of bankruptcy occurred from a result of giving up its responsibility as a local government, confronting the change of central-local relations. The study points out that the case of Yubari provides significant policy implications for government for local governments in Korea.
The Czech Republic and Slovakia, like other transition countries in Central and Eastern Europe, have given significant lip service to fiscal decentralization and engaged in public administration reforms. But the subnational governments of their public finance systems still lack relative autonomy, which could be addressed partly through developing independent revenue sources for their municipalities and regions. Currently, such independent revenue sources include the proceeds of a strictly nominal property tax as well as those of a small set of local user fees and taxes designed and approved by the central governments. Together they represent only about 5 percent of total municipal budget revenues. A number of market democracies have used user fees dramatically to generate revenues for local governments, a possibility that remains undiscovered in the Czech Republic and Slovakia. User fees could potentially generate badly needed revenue for the municipal and regional governments of the twin republics. The user fees and taxes currently available to the local governments of the two republics are reviewed, primarily to demonstrate their current, very limited use. The revenue implications of current fees are also addressed, revealing them as little more than nuisance fees. A discussion on the growing significance of user fees globally and their potential for the Czech Republic and Slovakia suggests the possibility for heavier use. Particular attention is paid to the question of charging user fees not only for cost recovery, but to provide some budgetary relief for hard-pressed local authorities in economic transition. A basic theory of optimal, revenue-enhancing user fees is presented.
The 20th century has been called the era of centralized authoritarian rule.On the other hand, the 21st century is known as the era of devolution.In this lecture, I will first explain the reasons why a decentralized society, that is, devolution, has become necessary.Second, I will give a general outline on the OECD system of fiscal relations across government levels.Third, I will examine the present state of the reform for decentralization that has been undertaken in Japan in recent years, and fourth, I will investigate the situation of local government finance in the age of devolution in reference to the principles of the European Charter of Local Self-Government.
One of the most fascinating advancements in public economics in the past decade is the emergence of second generation of decentralization.Not like the early generation following Charles Tiebout in 1956,the new development of federalism focuses not on public finance,but on the role of incentives and behavior of local officials in preserving the markets,enhancing regional competition and fostering economic growth.In the context of evolution of central-local relationship in China,and of decentralization during post-1978 era,this paper attempts to construct a Chinese story of economic transition and growth by tracing and outlining the theoretical and empirical elaboration of fiscal decentralization,Chinese style.
INTRODUCTION American state and local governmental fiscal institutions present a contrast. Many scholars regard these institutions as dysfunctional: balanced-budget provisions do not produce balanced budgets; debt restrictions do not restrict debt issue; tax and expenditure limitations limit neither taxes nor expenditures; and budget stabilization funds fail to provide budget stabilization. Richard Briffault, for example, concludes āstate constitutional debt restrictions have been circumvented by new and creative financing devices that tend to drive up the cost of borrowing, encourage the fragmentation of state governments, and facilitate the evasion of balanced budget requirements.ā In contrast, American state and local governments are quite responsible by any reasonable measure of fiscal probity. They borrow large amounts of funds and rarely fail to service or repay their debts. The vast majority of state and local debt is issued to finance infrastructure investments, and American infrastructure is in many respects the best in the world. The decentralized structure of American government, while far from perfect, often is held up as a system of how to constrain the powers of government through the institutional mechanism of federalism. We resolve the apparent contradiction of these two views by looking deeper into the effect of fiscal rules on the structure of American governments. The structure of American state and local governments has changed frequently, if episodically, since 1776. We argue that scholars have failed to appreciate the degree to which fiscal issues have shaped the structure of American state and local government.
The Chinese central and local government relationships have been dynamically evolving since the foundation of P.R.China.The characteristics of central and local government relationships can be sum- marized as centralization-decentralization circular in the past planned economy period.By reforming fiscal sys- tem and government institutions,central-local relationships changed significantly,and China economic and po- litical systems have made prominent progress since reform and opening-up policy.Nevertheless,there are man- y problems in this topic,such as the degree of centralization and decentralization,whether central and local governments should have financial resources proportionate to their duties and responsibilities,and the strength of central and local governments.Thus,we should take measures in economic and political systems to improve the central-local relationships including transforming government function,setting up public finance and opti- mizing administrative structure.
The topic of this bachelor final project is "Variability of municipal revenues in Czech republic and causes". The goal of the project was to analyze revenues of communities of the chosen region, to find differences in these revenues, and to specify the cause of their origin. The introductory part consists of the theory of fiscal federalism, decentralization and functions of public finance. The main part talks about municipal authority, her fiscal system, position of tax revenues and factors that cause differences in tax revenues.
Observation of the first and second generation of literature on fiscal decentralization together with further branches of political economy, e.g. specifically on the political economy of intergovernmental grants and the widening literature on political business cycles leads to a puzzle: decentralization is a continuing policy trend however in reality there are downsides, institutional, political and other factors that do interfere with decision-making and can increase the chances for inefficient policy outcomes. Infrastructure investment finances at all levels of government are especially prone to election cycles and corruption. Driven from the above context the basic research question guiding my work is: whether local infrastructure policies in Hungary are really designed according to efficiency considerations? What politico-economic factors might affect central and local governmentsā allocations on infrastructure investment? To complete this goal, a closer look at municipal capital investment financing in Hungary takes place. Related to the main research question several themes emerge and hypotheses are checked on the effects of the revenue base, local need and socioeconomic indicators on local investment strategies and financing constructions or grant allocations. Does grant financing mean a less careful financial planning? What is the importance of lobbying through different channels? I also search for - and in fact do find evidence of electoral cycle effects and partisan considerations (effect of similarities in political color of central and local governments) in intergovernmental grant distribution and in municipal investment activities. These issues to be researched call for a mix of quantitative and qualitative methods. Some of my hypothesis are tested on limited data from a 2004 survey of city mayors in Hungary. Hypotheses on cycles, determinants of investment outlays of local governments and grant recipiency are tested with linear and Probit panel regressions respectively on a panel dataset comprehensive for all Hungarian local government budgets from 1993-2003, a period bridging three election cycles, linked with some demographic,socioeconomic data and local election data. Findings can add to the discussion on reforming local government finance system overall, on the agenda in Hungary for quite a while, but perhaps also to the new literature on the political economy of failures, delays in socially beneficial reforms. What this dissertation certainly does contribute to is the fairly small pool of international empirical evidences available on political budget cycles, especially at the sub-national level and the emerging literature on the political economy of intergovernmental grants providing the case of one transition country that irrespective of the fact of by now being an EU member sometimes shows certain similarities to the developing ones.
Open access
Local Government Finance and Decentralization
Regional Development and Policy
Hungarian Social, Economic and Educational Studies
Local government finances have been assuming greater importance in India, particularly after the decentralization movement started with the 73rd and 74th constitutional amendments in 1992. The structure and trend of the finances of urban local governments is widely varied, yet, it is not so well-documented. This paper is an attempt to provide an outline of urban public finances of select cities in India. It presents the structure of the aggregates of municipal finances of these select cities and the trends over a period of time, so as to give an overview of how well they are placed and how good their movements are. It discusses both revenue and expenditure accounts as well as the capital and current account balances of the urban local governments. Local government finances of citiesāboth on the revenue and expenditure sideāpresent a weak base and loose foundations compared to those of other countries, and therefore, point to the need for bringing about reforms in that direction among these institutions.
The Czech Republic and Slovakia, like other transition countries in Central and Eastern Europe, have given significant lip service to fiscal decentralization and engaged in public administration reforms. But the subnational governments of their public finance systems still lack relative autonomy, which could be addressed partly through developing independent revenue sources for their municipalities and regions. Currently, such independent revenue sources include the proceeds of a strictly nominal property tax as well as those of a small set of local user fees and taxes designed and approved by the central governments. Together they represent only about 5 percent of total municipal budget revenues.
Fei Yuan, Ran Tao, Zhigang Xu, Mingxing Liu Ā· 6 authors
Based on the theoretical literature of fiscal decentralization, we discuss the political economy of inter-governmental fiscal arrangements in China and examine how a transfer-based decentralization impacts on local public employment. A theoretical model is built to show that compared to their counterparts in better-endowed localities, local governments in worse-endowed localities that are more heavily dependent on upper level fiscal transfers to finance their spending have higher incentives to increase public employment to build local political support rather than invest in growth-promoting public goods. Using a county-level panel data set from 1994 to 2003, we empirically identify the causality from higher transfer dependency to the expansion of public employment with an instrumental variable approach. It is argued that under a governance regime in which local governments are more accountable to the upper level than to local constituency, transfer-based decentralization, either through general-purpose transfer or through earmarked transfer, would both lead to serious problems. The policy implication is that expenditure decentralization needs to be accompanied by both revenue and political decentralization to achieve better local governance outcomes.
The thesis deals with problems facing municipal financing in Azerbaijan. Following the exploration of the options for a better design of local government financing.
Can we agree fully with the statement, that āagricultural spending is a major distorting factor in the EU economy and a distinct obstacle to the Lisbon agendaās implementationā? (Gros, 2008) Is it without question that Europeās agriculture is in position to become sustainable and competitive without certain kind of common policy with no Community financing? Is it unambiguous in every respect, that the challenges facing the sector ā globalization, trade liberalization, climate change, water management, Lisbon process, enlargement, changing preferences ā could be answered at national level utilizing exclusively national financial sources? The answers to these questions are complex. So the purpose of the paper is multiple: - Exploration of factors justifying community level intervention. ā Could be applied the bottom line of the ādecentralization theoremā to budgetary questions and needs of the agricultural policy? According to our hypothesis the answer is considered yes. - Assessing present CAP - taking into account its ability to provide EU wide public goods (multifunctional elements serve in deed significant cross-border externalities) and to create EU value added. - Making an attempt to redefine EUās agricultural policy through exploring objectives having a greater impact by being implemented at the supranational level and not at other secondary decision levels. ā Making an attempt to outline a Common Rural Policy, a policy promoting the provision of public goods required by the society by means of targeted and decoupled economic policy measures. In order to attain the objectives of the paper we apply the theory of fiscal federalism, make analysis on EU public finances in a broader context.
River floods can be very damaging. Since numerous human responses to floods are possible, the question arises: What is the organization of flood management that leads to the most efficient results? The dissertation first considers flooding and flood management in Germany. Based on that analysis, a theoretical, political-economy model of public flood defense is developed. The basic model is then extended to allow migration between upstream and downstream regions as well as between flood-prone areas and zones without risk. As different flood protection measures have quite different spatial characteristics, the distribution of responsibilities between the different actors is decisive for the overall performance of flood management. The distribution of public responsibilities among the different federal actors is crucial for two reasons. First, there are unidirectional upstream-downstream spillovers that raise the question whether decentralized or centralized provision of public goods is more efficient. Second, benefits from flood protection are concentrated to flood-prone areas near rivers. This concentration creates a natural heterogeneity of preferences for flood defense. These two aspects are also relevant for other issues in water management. Unidirectional spillovers and spatially heterogeneous preferences for public goods challenge the federal organization of flood defense. Following the lead of recent political-economy contributions to fiscal federalism, both aspects are investigated in a two region model with majority voting. Four different decision-making structures are compared: classical decentralization or centralization (based on jurisdictions containing voters both with and without preferences for the public good) and decentralized or centralized single issue authorities (whose jurisdictions, by definition, contain only high preference voters). Decentralized jurisdictions separate upstream and downstream voters, whereas a centralized jurisdiction comprises both groups. It turns out that centralized jurisdictions lead to a very low public good surplus and that either classical decentralization or decentralized single issue authorities achieve the best results under most conditions. The centralized provision of public goods is flawed because there is either an extreme over- or an extreme under-provision of the downstream public good. This can, however, be mitigated if there is a common standard for flood protection or if only the upstream provision of the public good is centralized. Whether or not these two solutions are beneficial depends on the magnitude of spillovers and also on the voting majorities in the two regions. Expanding the model to consider migration led to more complex results. First, citizens can migrate to flood-prone areas. Such migration flows can be induced by too large public flood defense, which is favored if citizens outside of flood-prone areas also finance the public good. Second, migration flow is also influenced by spillovers. The socially efficient population distribution is U-shaped with respect to spillovers. With symmetry assumptions, negative as well as positive unidirectional spillovers favour larger downstream populations. With myopic voters that neglect migration flow, this pattern is not achieved and the downstream population is large for positive spillovers and small for negative spillovers. Centralized jurisdictions are preferable to decentralized ones for smaller spillover effects if migration is possible. This argument is even stronger if voters take migration responses to the provision of public goods into account. The results shed light not only on the federal organization of flood management, but also on the institutional difficulties that arise from the current policy paradigm of the river basin approach to water management.
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 ā 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.
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 ā 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.
The Government of Ghana introduced the decentralization concept in 1988 as part of hereffort/determination to make local government administration autonomous in Ghana. Themain aim of the concept was to make the people at the grassroots part of the decision makingprocess with the view to ensuring total socio-economic transformation of the country. Untilthen, decentralization was not a new phenomenon in the politics of Ghana, however, it hassince 1988, assumed a new dimension. New structures and institutions such as the NationalDevelopment Planning Commission (NDPC), and the District Assemblies Common Fund(DACF) were established by law. These structures and institutions sought to transfer means,skills, power and competence to the districts. The DACF is believed to be the majorinnovation under the reform. The fund, which constitutes five percent of the National Income(NI), is disbursed by the central government to the districts through the Office of the CommonFund Administrator. In addition, each DA is required to generate revenues from local sourcesreferred to as Internally Generated Fund (IGF) to supplement the DACF to carry out socioeconomicdevelopment of the local areas.It is against this background that, this study was carried out to describe and explain theimplementation process of the Fiscal Decentralization Policy in the Akuapem South Districtof Ghana. The study set out to describe the assumption that inadequate bureaucratic resources,lack of political resources, poor economic and social resource and lack of inter-governmentalcommunication and enforcement agency may impede effective implementation of the fiscaldecentralization policy in the district. The Mixed method approach of social science researchand a case study approach were used in the study. Interviews and questionnaires were used tosolicit data for the study.The research found out among things that the fiscal decentralization policy is underway.However, the ability and capabilities of the DAs implement the policy is affected by variousseveral factors namely bureaucratic resource such as technical, managerial and financialresource; political resource which implies the acceptance by the bureaucrats of the policy;economic and social resource such as the social condition prevailing at the time of theimplementation; and the inter-organizational communication and enforcement agencieswhich refers to the relationship between the policy makers and the implementers. The studyconcludes that for effective implementation of fiscal decentralization in Ghana there is theneed to provide the necessary resources intended for the policy.2The study seeks to investigate the implementation of the fiscal decentralization policy in theAkuapem South District of Ghana. It aims to highlight some of the challenges confrontingthe district in the implementation of the policy and the strategies being employed to meetthese challenges.
Peru is experiencing a deep political and fiscal decentralization process, especially since 2002. The newly created regional governments now share power and resources with the existing municipal governments as well as with the national or central government. The national government has transferred important responsibilities and fiscal resources to regional governments and also has reinforced local governmentsĆ¢ā¬ā¢ budgets. Both levels of subnacional governments have doubled their budget revenues in only five years. However, they are mostly financed by national government transfers instead of own collected taxes. This study analyzes in detail the functions as well as the fiscal resources of subnational governments in Peru. Based on this analysis, a set of proposals to increase direct income sources for both levels of government are discussed.