Fiscal decentralization has always been an interesting investigation topic, and the researchers, in addition to considering the future of the economy, study this problem from different. Fiscal decentralization and public sector efficiency. Guidance for subnational government pefa assessments. An analysis of the effect of fiscal decentralisation on. The rwanda fiscal decentralization strategy fds has been developed to guide the implementation of the government of rwandas fiscal and financial decentralization policy ffdp and is to be read and understood in collaboration with the decentralization policy dp and the rwanda decentralization strategic framework as amended to date. It is therefore worth revisiting what we know about political and economic institutions to understand how and under what circumstances decentralization can be beneficial. For example, decentralization may have induced local governments into overinvestment, duplication, regional market protectionism, and more local bureaucratic interventions. With the german government having evaluated its own decentralization projects in countries. Political, administrative, and fiscal decentralization vary in form, combination, and degree among countries, and within sectors in each country litvack and seddon 1999.
Erdtechnical note series economics and research department no. Fiscal decentralization and the efficiency of public. The issue can then be raised whether taxation for mining should be more or less decentralized than for other types of economic activities. The role of fiscal decentralization in regional economic growth in china 4a contrary result. It increases decreases if, and only if, public expenditures under centralization, 2. This type of fiscal policy is sometimes used in various business models.
Fiscal decentralization in a for the asia foundation. Complete answers on the impact of fiscal decentralization are not likely to be. Establishing a new theoretical framework to explain decentralization. A first ambiguity is that decentralization can have either a static or dynamic interpretation. The growth dimension of fiscal decentralization is emphasized for two reasons. Measuring fiscal decentralization exploring the imfs. To guarantee a minimum level of public service and basic needs or standard of living for the entire population regardless of their geographical location, the central government often. Partial fiscal decentralization and subnational government fiscal discipline. Achievements and challenges of fiscal decentralization. Beyond conducting the usual regression analysis of the relationship between fiscal decentralization and aggregate government size national and subnational combined, this paper makes the first attempt to examine how different fiscal decentralization measures affect the sizes of national and subnational state and local combined governments.
The question of combining the implementation of the new aid agenda with the challenges. Distribution of conditional transfers contents acknowledgements 3 1. Opportunities, challenges and policy issues 2008, papers web address in reading list. Theories of decentralization based on political motivations51 2. Local elections, state capture, and development in nigeria january 30, 2020 in fiscal decentralization. A survey of current methodologies faigy abdelhak, jihyun chung, jingqiang du, and valerie stevens march 2012 1.
Income inequality, fiscal decentralization and transfer. Integrating lagging and leading areas in the middle east and north africa february 14, 2020 in africa subsaharan. While measuring decentralization is equally complex, the fiscal flows to, from and among different levels of government can be used assess some aspects of fiscal decentralization. Delayering often involves decentralization from middle management to line managers. It is intended primarily for policymakers, in this case meaning civil servants and their. This enables us to compare the two data sources, but also to use expenditurebased indicators of fiscal decentralization from the. Bird and francois vaillancourt recent years have seen worldwide interest in. Fiscal decentralization refers to the set of policies designed to increase the revenues or fiscal autonomy of subnational governments. Fiscal decentralization imf summary advice imf public financial management and its emerging architecture. Transferbased decentralization and poverty alleviation. The views expressed in this publication are those of the authors and do. Decentralization is a complex phenomenon involving many geographic entities, societal actors and social sectors. Fiscal decentralisation kenneth davey introduction fiscal decentralisation comprises the financial aspects of devolution to regional and local government. Feld university of freiburg and walter eucken institute benny geys norwegian business school bi and vrije universiteit brussel october 2012.
For the problem of decentralizing government activities, mobility across regions is a critical factor. World bank institute find, read and cite all the research you need on. Decentralization is a complex and multifaceted concept that spans fiscal, political, and administrative dimensions. The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies.
When is fiscal decentralization good for governance. Pdf concept of fiscal decentralization and worldwide. Government privatizes or deregulates private functions. Pdf on jan 1, 2009, usman mustafa and others published fiscal decentralization find, read and cite all the research you need on researchgate.
Other countries indicator china developing transition oecd countries economies countries subnational share of 48 16. Decentralization financial definition of decentralization. Fiscal decentralisation, efficiency, and growth request pdf. The pursuit of decentralization is widespread, as both developed and developing countries attempt to challenge central governments.
In a unitary state, the head tax does not distort economic decisions. While there is a rich literature on the theory and policy of the subject, there are relatively few empirical studies. Public finance fiscal decentralization for poverty reduction in asia. If you want to go far, go with many february 19, 2020 in mena. July 2005 understanding fiscal decentralisation in south. The country has made important first steps in the decentralization process, but as yet. Furthermore, fiscal decentralization brings government closer to the eople and a p representative government works best when it is closer to the people stigler, 1957. After combining the above variables from various data sources, we. This study examines cases in which both subnational and national governments have the same. In the last two decades there has been a worldwide interest in decentralization of government in all parts of the world. A restructuring of a functional structure to a productbased structure will generally involve some degree of decentralization, especially regarding operational but not strategic matters. The theoretical argument for fiscal decentralization is formulated as each public service should be provided by the jurisdiction having control over the minimum geographic area. Empirical work examining the effects of fiscal decentralization on income inequality has generally shown a conditional negative relationship between income inequality and fiscal decentralization.
Fiscal decentralization forms the backbone of myanmars efforts to strengthen public services, encourage development across the country, and secure peace and stability. Fiscal decentralization and local finance in developing. First, there is a generation gap to switch form manual to electronic. Fiscal reforms and the rise of transferbased decentralization in china china is a unitary state and its government consists of five layers of state administration. Fiscal decentralization is an approach that calls for disbursing the control of finances to various points within a network or operation rather than having all financial control residing at a single point within the network. The undp role in decentralization and local governance vi foreword undp and the german federal ministry for economic cooperation and development bmz collaborated on a critical assessment of undp support to decentralization and local governance. Fiscal decentralization and the efficiency of public service. A normative approach may take the political structure as given and then see what economic consequences result. Fiscal decentralization policies can assume different institutional forms. Concept of fiscal decentralization and worldwide overview. It can signify the state of being decentralized or the process of becoming so.
For example, fiscal decentralization may yield unintended economic. Fiscal decentralization by bernard dafflon the distribution of tasks among the different levels of government local, regional, national goes hand in hand with the competence of individual administrative authorities to collect taxes and assume responsibility for their budget. Fiscal decentralization involves the existence in one country. Fiscal decentralization and growth 247 economy is given by dyrdt 1 s 1ytt au u u1yarabragravrayr. Fiscal decentralisation overseas development institute. Fiscal decentralization can also obstruct the redistribution role of the central government. Revisiting the decentralization theoremon the role of. Introduction decentralization is a concept that is not easy to define, and perhaps even harder to measure treisman, 2002. In addition, decentralization and fiscal contracting seemed to have increased. The role of fiscal decentralization in regional economic. He finds that fiscal decentralization maximizes growth but results in an underprovision of public goods, while fiscal centralization achieves the optimal provision of public goods under a median voter.
Decentralization, development strategy and economic. Concept of fiscal decentralization and worldwide overview english abstract. Measuring decentralization and the local public sector. Countries are reconsidering their fiscal systems and searching for the right balance between central government control and decentralized governance. Some studies in the theoretical literature also found unanimous approval for a positive contribution from fiscal decentralization to regional economic growth, because fiscal decentralization could improve the efficiency of resource allocation. A new approach to an old idea paul smoke massachusetts institute of technology, cambridge, massachusetts, u. The imf neither advocates nor discourages decentralization but instead takes the position that different types and degrees of decentralization are appropriate in different circumstances. May 04, 2020 fiscal decentralization is an approach that calls for disbursing the control of finances to various points within a network or operation rather than having all financial control residing at a single point within the network. Understanding the context of fiscal decentralisation.
Fiscal decentralization and local public financial. Fiscal decentralization may indeed have a direct impact on economic growth but the theoretical underpinnings for this relationship remain largely undeveloped. Fiscal decentralization in the mining sector some degree of fiscal decentralization is practiced in all nations. Second, we merge the grd data with the international monetary funds imfs gfs data. Fiscal decentralization and corruption in the public sector. Lewis harvard institute for international development, cambridge, massachusetts, u. Decentralization transfers from higher to lower levels of government the power to design and implement certain policies. First, economic growth is often cited as a major objective of fiscal decentralization bahl and linn 1, bird and wallich 4, oates. This can be illustrated by considering the use of a head tax.
Achievements and challenges of fiscal decentralization lessons from mexico edited by marcelo m. The ar ray of socio economic issues is wide and it includes grow th and development, reducing poverty and. Wider working paper 2016172 fiscal decentralization. Developed countries are reshaping their intergovernmental. The effects of fiscal decentralization on household income. An increase of transfers from the central government, the creation of new subnational taxes, and the delegation of tax authority. Jun 14, 2012 this paper develops a model to explain how subnational political regimes affect the variation in retention rates in a country in which a region and a central government bilaterally bargain over the distribution of tax revenue given a particular tax rate and thus fiscal decentralization is asymmetric.
This may explain why all of these studies focus on the growth rather than the welfare comparison between fd and fc. Wide approaches swaps and a gradual merging of scattered bilateral district. The novel contribution of this study is the focus on. Ebel and others published concept of fiscal decentralization and worldwide overview. On the other hand, fiscal decentralization, or the transfer of fiscal power from the central government to local governments, is seen as part of a reform package to all developed and developing countries to improve efficiency in the public sector, to increase competition among. Fiscal decentralization, also referred to as fiscal federalism can be broadly defined as the study of the structure and functioning of. Subnational political regimes and asymmetric fiscal.
Decentralization suggests that the power which was held by the centre moves elsewhere and in literature, it takes different forms. Principles of decentralization thomas courchene, jorge martinezvazquez, charles e. Features of fiscal decentralisation in south africa fiscal decentralisation refers to the percentage of total government expenditure executed by subnational governments, considering the size and character of transfers, or the level of tax autonomy of subnational governments, or both. Empirical evidence from oecd countries zareh asatryan university of freiburg and centre for european economic research lars p. This book documents mexicos decentralization experience as well as conceptualizing its main trends, policies, and options, and brings them into the light of international comparison. Many developing countries are seeking to improve governance with fiscal decentralization. Backed by strong empirical results, obtained from a number of different specifications, we contend that pse is increasing with fiscal decentralization. Oates the point of departure for my contribution to this symposium is the striking contrast in the extent of fiscal centralization of the industrialized and the developing countries. Pdf fiscal decentralization in developing and transition. The contribution of fiscal decentralization to regional inequality. In this case, previously concentrated powers to tax and generate revenues are dispersed to other levels of government, e. An economic theory of fiscal decentralization charles m.
897 172 1335 1549 284 529 840 469 929 1240 1015 219 1407 1553 327 1440 825 1200 879 687 1248 416 311 892 122 1080 14 539 536 721 85 231 294 534 1416 455 1065 989 891 1306 483 64 1113 966 787 258 216