Abstract We examine the role of political alignment and the electoral business cycle on municipality revenues in Greece for the period 2003–2010. The misallocation of resources for political gain represents a waste of resources with significant negative effects on local growth and effective decentralization. The focus of our analysis is municipality mayors since they mediate the relationship between central government and voters and hence can influence the effectiveness of any potential pork-barrelling activity. A novel panel data set combining the results of two local and three national elections with annual municipality budgets is used to run a fixed-effects econometric model. This allows us to identify whether the political alignment between mayors and central government affects municipality financing. We examine this at different stages of local and national electoral cycles, investigating both direct intergovernmental transfers (grants) and the remaining sources of local revenues (own revenues, loans). We find that total revenues are significantly higher for aligned municipalities in the run-up to elections due to higher intergovernmental transfers. We also find evidence that the 2008 crisis has reduced such pork-barrelling activity. This significant resource misallocation increases vertical networking dependency and calls for policy changes promoting greater decentralization and encouraging innovation in local revenue raising.
This paper theoretically underpins the idea of greater involvement of local governments in the overall development of India explained through the theory of Fiscal Federalism. The theory outlines the dynamics of decentralization of power and functions through a multi-layered governance system leading to a new structure and added functions, finance, and accountability to local government. The paper also provides an overview of the increasing role of urban local governments in India and investigates whether the Urban Local Bodies (ULBs) of Gujarat – a state in India, are efficient to perform the functions and responsibilities assigned to them by the 74th Constitutional Amendment Act (CAA). It scrutinizes the financial health of local governments in the urban regions of India. The results based on the application of MANOVA indicate that the 74th CAA empowered ULBs with a strong economic base that these ULBs are capable of mobilizing their own resources. This means that smaller municipalities must develop and convergence must be supported by a proportionate level of grants. This will ensure that with the development of social infrastructure, economic activities will increase, and, as a result, the conversion will occur.
Julio López Laborda, Fernando Rodrigo, Eduardo Sanz Arcega
A necessary condition for the efficiency gains that the theory of fiscal federalism attributes to decentralization to be effective is that citizens rightly assign the governmental responsibility for public action. However, surveys show that most Spaniards are unable to correctly identify the taxes received by the various levels of government. Exploiting the 2015 wave of the Spanish Institute for Fiscal Studies’ Fiscal Barometer, this paper empirically determines the profile of citizens who are best able to identify the allocation of taxes among levels of government in Spain. The estimates suggest that these citizens are those who are able to identify the government that provides the services financed by those taxes, who correctly identify other taxes received by the same government, who reside in a chartered (“foral”) region, and who enjoy a high level of education.
Given the complex and severe external economic environment and the increasing downward pressure on the domestic economy, fiscal policy, as a structural policy, is expected to stabilize growth. However, affected by the implementation of tax and fee reduction policies, the cooling of land finance and the strict control of hidden debts, the pressure on local public finances has become increasingly prominent, and the space for proactive fiscal policies is limited. In order to make subsequent policies more steadily advancing in response to the downward pressure on the economy, on the one hand, we must ensure fiscal sustainability to provide guarantees for the stability and sustainability of economic operation; on the other hand, we must avoid preventing and controlling risks in a “one-size-fits-all” way to leave a cushion for expansionary policies. Therefore, under the current economic and fiscal situation, it is of great practical significance to scientifically understand local fiscal situation and examine the impact of key institutional factors on local fiscal sustainability based on the Chinese-style fiscal and political systems.Fiscal competition and soft budget constraints are the two core issues contained in the Chinese-style decentralization system, which have a profound impact on the fiscal behaviors of local governments. This paper integrates the two into a unified analytical framework, analyzes their impacts on local fiscal sustainability by distinguishing the modes of fiscal competition and the forms of soft budget constraints, and investigates the interaction effects between them. The results show that both tax competition and expenditure competition have a significant negative impact on fiscal sustainability. For different forms of soft budget constraints, the effect of transfer payments on local fiscal sustainability is uncertain, while land revenues and municipal investment bonds have a significant negative effect. Research on interaction effects shows that the interaction between transfer payments and fiscal competition is conducive to fiscal sustainability, but the interactions between land finance, municipal investment bonds and fiscal competition are not conducive to fiscal sustainability. Further research indicates that there is regional heterogeneity in the above effects.This paper proposes the following policy recommendations: Firstly, it is very necessary to establish a fiscal system that the revenue resources and expenditure responsibilities commensurate, reform the political promotion mechanism and establish a diversified performance evaluation system. Secondly, in the governance of excessive fiscal competition and soft budget constraints, the interaction between them should be considered. More specifically, central government may encourage standardized and orderly fiscal competition to reduce local government's reliance on off-budget revenue, and increase transfer payments to ease excessive fiscal competition. Thirdly, to ensure sufficient fiscal space and sustainable fiscal policies, differentiated designs should be made according to the economic development level and fiscal status of different regions, as well as the interactive mechanism between the modes of fiscal competition and the forms of soft budget constraints.
Qurat ul Ain, Tahir Yousaf, Yan Jie, Yasmeen Akhtar
This paper provides empirical evidence on the association between post-2001 devolution reform policy, government size, and specifc components of government expenditures based on a sample of panel data of provincial units in Pakistan from 1990 to 2015. The results demonstrate that devolution is associated with a larger government size, which provides empirical support for the common-pool hypothesis, implying that the decentralization that matters for the size of the general government depends on how sub-national governments finance their expenditures. Moreover, the fndings suggest a signifcant increase in the magnitude of Health and education facilities at the local level following the devolution reforms.
2008 yılında bir makale ile ortaya çıkan, kriptoloji biliminden faydalanan ve dijital bir sanal para birimi olan kripto para, son yıllarda en çok tartışılan ekonomik kavramlardan biri olmuştur. Bu çalışmada yatırımcı ilgisini temsil eden Google arama sayılarının paylaşıldığı Dünya geneli Google Trends “Bitcoin” aramaları ile Bitcoin/USD fiyatlarındaki değişim arasındaki ilişkiyi incelemek amaçlanmıştır. Diğer bir ifade ile Google aramaları ve Bitcoin/USD”nin birbirleri üzerinde açıklayıcı bir etkileri olup olmadığı tespit edilmeye çalışılacaktır. Bitcoin/USD verileri investing.com adresinden, Trend verileri ise https://trends.google.com/ temin edilmiştir. Araştırılan veri seti 26.04.2015 ve 19.04.2020 arasındaki haftalık 261 gözlemden oluşmaktadır. Bu çalışma da, Bitcoin/USD ile “Bitcoin” kelimesinin aranma sayısı arasındaki ilişki ARDL testi ile incelenmiştir. Fiyat değişkeninin(Bitcoin/USD) logaritmik değişkeni oluşturulmuştur. Philips Perron (PP) ve Geliştirilmiş Dickey Fuller (ADF) birim kök testleri ile serilerin durağanlıkları kontrol edilmiştir. Fiyat değişkeni (Bitcoin/USD) I(1) birinci farkta, Bitcoin değişkeni (Google trends) I(0) seviyede durağan olduğu sonucuna ulaşılmıştır. Daha sonra değişkenleri arasındaki ilişki ARDL ile incelenmiştir. ARDL testi sonuçlarına göre, kısa ve uzun dönemde aralarında bir ilişkinin varlığına ulaşılmıştır. Yapılan sınır testine göre bu iki değişken arasında eş bütünleşme var olduğu kanıtlanmıştır. Ayrıca yapılan Granger Testine göre Bitcoin google arama sayısı ile (Fiyat) Bitcoin/USD arasında tek yönlü bir ilişkinin varlığı elde edilmiştir. Bitcoin/USD Fiyatlarında bir değişim insanları google üzerinden bitcoin aramasına itmektedir. Bu sonuçlar Bitcoin’in halk arasında merak edilen ve takip edilen bir sanal para birimi olduğu, bu parada meydana gelen bir hareketliliğin bitcoin’e olan ilgiyi artırdığı sonucuna ulaşılmıştır. Elde edilen veriler Stata 14,2 programı ile analiz edilmiştir.
In this thesis, we examine the political economy of public finance. I provide a general introduction to the thesis in Chapter 1. In Chapter 2, I examine the determinants and interrelationship of different types of government expenditure using data on 73 countries for the period 1990-2016. The results show foreign aid receipts and urbanization have raised total expenditure, but external debt stocks have reduced total expenditure. Also, there is a substituting relationship between expenditures on social protection and pure public goods, and education and defence, but complementary relationship between all other categories of government expenditure. \nIn Chapter 3, we provide an up-to-date empirical assessment of the relationship between economic globalisation and government spending for the ‘hyper-globalisation’ period of the 1990s and 2000s. The results suggest that hyper-globalisation has had divergent and conflicting effects on consumption spending: while the globalisation of trade has tended to raise spending, the globalisation of finance and foreign investment has tended to reduce it. However, the size of the effects is quite small, and there is no evidence that spending has risen by more in countries which are particularly prone to terms of trade shocks. \nIn Chapter 4, I examine the mediating effect of democracy in explaining the relationship between decentralization and government size for the period 1970-2013. I proxy decentralization by fiscal decentralization, use total spending as our primary measure of government size, and adopt the V-Dem high-level democracy indices as measures of democracy. I use the fixed effects estimator with Driscoll-Kraay standard errors and the instrumental variable estimation technique. Our main finding is that fiscal decentralization and democracy in themselves are effective tools to ‘starve the beast’ as they lead to reduced government size, with the former suggesting support for the Leviathan hypothesis. I find evidence of the mediating effect of democracy in the relationship between decentralization and government size; a positive and statistically significant effect of the interaction term with the effect size largest for participatory democracy. We do not find a non-linear relationship between decentralization and government size. \nIn Chapter 5, we examine how local governments’ political alignment with the central government affects subnational fiscal outcomes. We analyze data from Ghana, which has a decentralized political structure with substantial political and fiscal powers delegated to the district level, and high dependency on intergovernmental transfers. Using a regression discontinuity design for a new dataset for 1994-2014, we find that districts with an aligned Member of Parliament and District Chief Executive (DCE) receive more transfers and have higher expenditures. In a second step, we instrument transfers and estimate a flypaper effect for Ghanaian districts.
The research on the influencing phenomena at the budgetary process of Local Government Union Councils in Bangladesh is based on a combination of political psychology, applied economics and public management issues (i.e. decentralization, local government finance, and local governance, as well as the budgeting theory and local government budgetary process). The purpose of the research is to explore the critical influencing phenomena and their relative influences on Union Councils’ budgeting decisions. The study reveals that the influence of concerned phenomena or issues does not always collide with the budgetary autonomy of Union Councils, but the effects of the influencing issues on their budgeting decisions are evident with varying degrees and dimensions. The study has employed qualitative method with six case studies on criteria based purposively selected Union Councils at Sunamganj District in Bangladesh.
The author considers fiscal incentives of regional authorities in the system of federal intergovernmental relations. The aim of the study is to determine how the debt burden of Russian regions affects regional fiscal policy in the context of federal co-financing of expenditure obligations. The work employed the methods of grouping, one-dimensional cluster analysis, correlation analysis, and regression by generalized method of moments (system-GMM). The study found that the increase in the regional debt burden relates to a decrease in the level of local fiscal decentralization. Intensive debt financing of regional expenditures in 2013–2015 also reduces the willingness to regionally co-finance federal priorities. The author concludes that high debt burden reduces the fiscal incentives of regional authorities to co-finance federal initiatives and creates the risk of underfunding of national projects.
Abstract This article examines the politics of the Federal Reserve System of regional banks. While regional banks have long lacked meaningful influence over monetary policy, their leadership stands to provide a base of elite support for the Federal Reserve. To serve this role effectively, however, regional bank leadership must reflect the ideological diversity of political elites. This article provides the first quantitative empirical analysis of the ideological composition of the regional banking system, introducing a novel data set of all regional bank directors serving from 1980 to 2015 and linking each individual to a measure of political ideology derived from campaign finance contributions. With these data, I examine the degree to which regional banks are ideologically aligned with the districts and industries they are assigned to represent. The results highlight a new function for the decentralized central banking system and opportunity to address declining levels of public confidence in the Fed.
The role and place of costs policy in the modern system of financial regulation of budgetary institutions is defined. The priorities facing the national system of budgetary institutions are identified, taking into account the need to strengthen its effectiveness and efficiency, including in the part: creating conditions for increasing the economic independence of budgetary institutions based on the replacement of estimated funding for end-to-end budgeting; updating the institutional mechanisms for financing and co-financing of socially important services; increased transparency and publicity of activities; introducing a system for evaluating the quality of services provided; introduction of an institution of effective public financial control at all stages of the management cycle, starting with planning. A methodology for evaluating the socio-economic costs efficiency of budgetary institutions is proposed, including the definitions of relative fiscal autonomy and of the decentralization level of the system of financing for the network of budgetary institutions, which can be used to characterize the compositional structure of financial policy in the sphere of costs. The role of fiscal decentralization in financing the costs of social development is defined. The specifics of use of the program-targeted method in financing the activities of budgetary institutions are characterized. Ways to improve the cost efficiency of budgetary institutions in the spheres of education and public health are suggested.
Decentralization and fiscal decentralization constitute one of the most followed trends for political and economic reform in recent years around the world. Albania, in the 1990s, begins its process of transitioning from a centralized economy to a free-market economy. This process is accompanied by transforming existing economic mechanisms and infrastructure to better function the free-markets model, but above all, with the need to develop and create new legal, institutional, economic, and social instruments and spaces to increase the allocation and efficiency of public and private resources. The objective of this study is to give an appropriate answer to the question: What has been the impact of decentralization reforms on the performance of public services provided by local government? The research paper will focus on the role that improvements and legislative changes play in the country's economic growth. Within the past two decades, progress is made in advancing decentralization reform, but there are still many challenges ahead, such as the lack of a clear legal and regulatory framework. Adding to that concern is the financial autonomy of local governments, which remains a challenge for the future. The research methodology used will be a descriptive analysis of data obtained from the Ministry of Finance and Economy and local municipalities on the impact of the reforms. Recommendations and suggestions will be given on the reforming process, as well as ways to increase the efficiency of local government units.
Abstract Why do common-pool problems persist over time in federations? The literature shows that macro institutional, economic, and political incentives facilitate bailouts through intergovernmental transfers and debt management. Little research, however, explores the legislative mechanisms that prevent common-pool problems from being effectively addressed. This article focuses on a most central mechanism: tax lawmaking. We argue that lawmakers, whose careers rest in the hands of provincial constituencies, administer the legislative process to promote bills that protect the federal transfers that finance vertical fiscal imbalances and to amend proposals that seek to change them. Using an expert-coded dataset designed to assess the direction and magnitude of tax policy change, as described by the amendments proposed by legislators to the full set of tax bills proposed to the Argentine Congress since 1983, we document the legislative dynamics underpinning the common-pool problems of decentralized fiscal federal arrangements.
In connection with the expiration, in 2020, of basic regulatory and legal acts coordinating the implementation of the decentralization, it is needed to actualize and determine further directions of reform of the public finance management system. The purpose of the article is to determine efficient methods and directions of further improvement of the financial equalization system in Ukraine in order to form progressive local budget resource model, which by more balanced socio-economic development of municipalities will meet the needs of the population. The article addresses the essence and main components of financial equalization as a tool of budget regulation. The contents of the fiscal imbalance, horizontal and vertical equalization, evolution of methods of removal of fiscal disparities are highlighted. A European approach to overcoming the effects of the unequal distribution of potential sources of the financing of expenditures of bodies of local self-government is characterized. Features and invariance of reform of the public finance management system on the basis of decentralization, renewal of the financial equalization mechanism are considered. As a result of research, the effects (achievements and shortcomings) of the functioning of tools of vertical and horizontal equalization in the budget system of Ukraine implemented as a result of reform of fiscal decentralization, are analyzed. Basic recommendations aimed at further strengthening and establishing a stable local budgets base being a foundation for the whole budget system and a financial basis for local self-government, are proposed, on the strategy of improving the financial equalization mechanism that will provide achieving a balance of the interests of all participants in inter-budgetary relations.
Nadiya Dubrovina, Erika Neubauerová, Michal Fabuš, Оксана Тулай
Nowadays the problems of optimal taxation and tax distribution are closely connected with growth of decentralization and democracy in the world, especially in EU and other countries, such as USA, Canada, etc. Many economists and analysts studied the problems of co-operation between central and local administration in the realization of the state programmes and efficiency of public services on different levels (central, regional or local). Due to the theoretical and empirical evidence it was clear that some functions of public administration on the central level are not carried out efficiently and some competences of public administration can be transferred to the local levels. Thus, the problems of competences and public finance distribution between central level (state) and other levels (regional or local) are the main aspects to discuss in the theories of fiscal federalism and fiscal decentralization. In the theory of fiscal federalism the problem of taxes allocation between different levels of government is considered to be one of important tools for realization of stabilization and allocation functions of public finance. It should be noted that one of the theoretical and research problems is how to evaluate the measure for financial decentralization. There are different approaches to this problem in modern research such as qualitative (for example, grouping countries based on some qualitative criteria or experts’ evaluation of reforms focuse on financial decentralization) or quantitative ( a set of different ratios, geometric mean of different indicators, aggregated index, etc.). The purpose of the research is to obtain the aggregated indicators for evaluation of public finance distribution on central and local levels and to analyze the balance between these indicators for EU countries. For our research we used the idea of aggregated indicator to evaluate the measure of dependence upon central government expenditure and measure of local autonomy development. Due to the methodology for calculation of aggregated index proposed by Helwig the value of the aggregated index is varied from 0 to 1, or from minimal possible level to maximum possible level of the generalized characteristics described by the original set of indicators. Thus, if measure of public finance dependence upon central government Int_C is more closed to 1, then central government plays a greater role in expenditure for public finance. If measure of local autonomy Int_L is more closed to 1, then local government has more opportunities in their revenue and expenditure. It should be noted that for the balanced position of the country on the plot the values of the Int_C and Int_L should be equal to or lie on 45 degree line. If the bundles lie upper 45 degree line it means that level of local autonomy is more expressed, and vice versa, if the bundles lie lower 45 degree line it means that level of local autonomy is less expressed. The aggregated indices Int_C and Int_L were calculated for EU countries during the period of 2002–2017 and it makes possible to evaluate the features of national fiscal policy in balance between distribution of funds for central and local levels.
Local governments in China faced a mismatch between fiscal revenue and expenditure responsibilities after tax sharing reform in 1994. Governments are not only suppliers of public goods, but also monopolists of the primary market of land, operating land assets through land transfer, and land mortgage to increase extra budgetary fiscal revenue. Relevant research and empirical evidence found that local governments tend to break the balance of public goods supply when pursuing the growth of land revenues, and they excessively increased economic construction expenditures and weakened investment in social security and general public expenditure. However, through the empirical analysis of panel data of 30 provincial capital cities in China from 2007 to 2015, we found that these cities tend to improve the overall public service environment in the region through land financing, thus continuously improving their relative competitive advantages.
The concept of decentralisation became one of the most discussed concepts in the literature, especially in political science and public finance in the post-2000 era with the globalisation process and the influence of international fiscal institutions. Many studies were made and literature was formed on the topic, based on the assumption that the transfer of fiscal authorities and responsibilities of the offering of public goods and services would create positive economic consequences particularly in developing countries.
Considering the critical influencing phenomena, the study explores the causal mechanism of influences, as well as how such process works that lead to shape the dominant implications of influences on local government Union Councils’ budgetary autonomy, leading to the impact on their local governance.The research reveals the fact that the effects of the influencing phenomena on the budgetary autonomy of Union Councils in Bangladesh are evident with varying degrees and dimensions, but the influences do not always collide with the budgetary autonomy of Union Councils there. The indicator-based empirical analysis reveals that the magnitude of influences is almost double than that of the budgetary autonomy of Union Councils in Bangladesh. Thus, the autonomy of Union Councils in their budgeting decisions is a concern in the study of decentralization and local governance in Bangladesh.Originality and significance:The research contributed in the literature stream of public administration, specifically in decentralization, local government finance as well as budgeting, and in local governance studies. The study findings to some extent substantiated the rationality of conditional national government transfers to the sub-national governments in Bangladesh. Beyond the general theoretical and practical significance of the study, its findings led to inviting a fundamental debate on the national-local tax base system and appreciated the fact that central hindrance towards effective functioning of the local government Union Councils in Bangladesh is the crisis of ownership and competence of UP representatives.
Abstract If fiscal decentralization promotes growth, why do some regions decentralize more than others? This article identifies the growing divergence of fiscal centralization among Chinese cities and explains it in a public finance framework. It argues that fiscal decentralization and its economy‐liberalizing effect entail significant short‐term fiscal risk. The more a locality relies on uncompetitive business ownership for fiscal revenue, the less likely fiscal decentralization is to occur. This article compiles a dataset of 20 provincial capitals between 1999 and 2016 to test for the connection between a city's tax base and its fiscal centralization level. It then pairs two “most similar” cities to trace how fiscal security concerns drove their fiscal and economic policies apart. This article adds a micro‐level perspective to the literature on fiscal federalism. By pointing out the fiscal constraints confronting local governments, it offers a new angle to understand the different growth paths of Chinese cities.
India is a federation whose roots can be found in the colonial period. Indian federal setup is clearly divided between centre, state and local government and likewise, the sources of revenue and responsibilities are also divided between them. The decentralization process in India is asymmetrical in the sense that decentralization of expenditure has been much more than the revenue decentralization as provided by the Constitution, thereby creating an imbalance in states’ income and spending. When this mismatch between the two is measured at different levels of government, we call it Vertical Fiscal Imbalance. In this paper, I have presented various definitions and measures of VFI given by several economists over the years and tried to measure the extent of VFI that exist in India since 1990-91 to 2014-15. We have used twenty five years data to make an analysis based on the data available in Finance Commission reports and Indian Public Finance Statistics. Our results show that the amount of revenue that has been decentralized over the period of study falls much short of the expenditure requirements that are expected to be met by the state governments. The situation is so intense that the state governments are left with no option other than relying on central transfers for financing their needs and that where the central government enjoys an upper hand and an authoritative power over the internal matters of the states. KEYWORDS: Expenditure, Decentralization, Indian federation, Revenue, Vertical Fiscal Imbalance.
The aim of this paper is to analyze how limits in revenue and spending autonomy of sub-sovereign governments influence their decisions. Revenue and spending autonomy indicators for Polish towns were established and used in analysis on school education expenditures during 2003–2016. The influence of limits on revenue autonomy on municipal spending has been extensively addressed in both theoretical and empirical literature. However, studies related to spending autonomy are rare. The analysis presented in this paper suggests that when limits exist in spending autonomy, more decentralized tasks are crowded out by regulated obligations. That is why the spending autonomy analysis is important to evaluate the equity between local units and the adequacy of local revenues to decentralized expenditures.The basic principle of local finance is that there should be an adequate relationship between the financial resources available to a local authority and the tasks it performs. However, in practice, the assessment of whether this has been achieved is very difficult. Often, only problems with the solvency of local governments indicate that we are dealing with a poorly constructed system of local finances. The expenditure autonomy indicator proposed in this article is a tool that provides a way to indicate problems with the adequacy of revenues before such anextreme situation occurs.
The modern treasury system is the core component of the modern fiscal institution, but it draws little attention and is rarely discussed by domestic academics, until the now-present there still lacks of appropriate discourse. In practice, the functional imbalance of the current treasury system in China is very obvious. One prominent problem is the looseness and vulnerability of budget execution control, which has given rise to the ubiquitous phenomenon of public fund precipitation, frequent budgetary adjustment, tardy payment schedule, and cash rationing. Another problem is the high-level decentralization of government cash balance caused by indiscriminate special fiscal account setup，and the decentralization has greatly weakened the core functions of the national treasury. This paper will clarify two core propositions of institutional reform of the state treasury, including the whole-process budget execution control based on the expenditure cycle, and the government cash management based on the centralization of cash balances. It is expected to construct an appropriate framework of the assignment of power and responsibilities for the treasury system, and promote the deepen reform of the state treasury, building up the coordinating roles of the Ministry of Finance and the People’s Bank of China in the modern fiscal institution and supporting the modern treasury system functions.