Assessment of fiscal decentralization influence on social and economic development. Fiscal policy coordination represents an important challenge for federal systems. The research on the relationship between fiscal decentralization and macroeconomic stability has been no results about the benefits of fiscal decentralization. As a widereaching institutional reform, chinas fiscal decentralization was launched in the early 1980s to encourage provincial economic growth by granting more financial autonomy to provincial governments. We posit that residual capital expenditure best captures a countrys level of fiscal. Chinas fiscal decentralization and environmental quality. Financial responsibility is a core component of decentralization. At the starting point of decentralization earmarking is generally tight and activity specific, while the longterm vision of fiscal decentralization is a system with more discretionary powers. Decentralization places the authority and responsibility for. Theory as reform james edwin kee, professor of public policy and public administration the george washington university abstract the last decade has seen a renewed interest in the concept of fiscal decentralization or fiscal federalism. Centrallocal relations in an era of fiscal decline.
The main variables, fiscal decentralization indices, are constructed using imfs gfs database and publications. Fiscal decentralization and the challenge of hard budget. An economic theory of fiscal decentralization nber. In the postmao period, fiscal decentralization began in 1980 under the slogan of cooking in separate kitchens fenzao chifan, and a series of reforms was implemented to put local governments increasingly on a selffinancing basis. This work is available under the creative commons attribution 3.
Lecture fiscal decentralization free download as powerpoint presentation. Description fiscal decentralization database is a panel of data on indices of fiscal decentralization every ten years from 1975, 1985, and 1995 for about 100 countries. Decentralization and the changing role of central finance. Conceptual and administrative considerations in achieving subnational fiscal autonomy by charles e. However, fiscal decentralization also affects other while fiscal federalism constitutes a set of guiding principles, federaliism guiding concept that helps in designing financial relations between the national and subnational levels of the federalksm, fiscal decentralization on the other hand is a process of fiscal federalism in ethiopia such. This form will be kept in your agency file at agency hr supportstate. Government privatizes or deregulates private functions. The paper presents ideas for a fiscal decentralization roadmap that are grounded in the countrys context, and that build on existing structures and reforms. Understanding the context of fiscal decentralisation.
Permission is granted for reproduction of this file, with attribution to the urban institute. Fiscal decentralization enters into poverty alleviation strategy in a number of ways. How can governments control spending pressure from influential groups, often representing historically grown regional interests. Lecture fiscal decentralization decentralization fiscal. Fiscal decentralisation kenneth davey introduction fiscal decentralisation comprises the financial aspects of devolution to regional and local government. Absent those conditions, fiscal decentralization can. An important component of the reform is to increase the fiscal autonomy of local authorities. Fiscal decentralization, public spending, and economic growth in china, cema working papers 58, china economics and management academy, central university of finance and economics. Decentralization in cameroon is an instrument to meet multiple objectives.
Fiscal decentralization and budget control explores possible institutional solutions to fiscal instability in countries that have traditionally been caught up in problems of overexpenditure and overindebtedness. This site is like a library, use search box in the widget to get ebook that you. The above quote drawn from a recent undp document underscores the need to develop a. Fiscal decentralisation and sector funding principles and practices annex 1 principles of expenditure assignments the views expressed in this paper are those of jesper steffensen november 2010 the authors and do not necessarily reflect the. This discourse has been complemented by the implementation of fiscal decentralization to increase the ability of subnational government in financing municipal service delivery. Siewierski abstract this paper proposes away to measure particularistic or pork barrel spending across nations. 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. Achievements and challenges of fiscal decentralization. This report takes stock of cameroon s experience with decentralization. The challenge is how conditionality can be relaxed or. Fiscal decentralization and fiscal policy performance. Fiscal decentralization, corruption and urbanrural income. Fiscal decentralization and public sector efficiency. It is structured into a number of parts as follows.
The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies. The current study covering the period from 1972 to 2009 is an attempt to find out the impacts of fiscal decentralization on public services deliveries in pakistan. View fiscal decentralization research papers on academia. A study of local government taxation in tanzania oddhelge fjeldstad and joseph semboja published in forum for development studies, vol. Fiscal decentralisation, efficiency, and growth request pdf. Thus, in this chapter, decentralization means both fiscal and political decentralization unless stated otherwise. Third, decentralization of expenditure needs to be accompanied by sufficient decentralization of revenue. Fiscal decentralization and options for donor harmonisation. Fiscal decentralization may indeed have a direct impact on economic growth but the theoretical underpinnings for this relationship remain largely undeveloped.
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. Click download or read online button to get fiscal decentralization in developing countries book now. Distribution of conditional transfers contents acknowledgements 3 1. Fiscal decentralization and macroeconomic stability. Exploring the causes and effects of revenue decentralization. In this case, previously concentrated powers to tax and generate revenues are dispersed to other levels of government, e. It provides an overview of fiscal decentralization for undp officers involved in policy debates on restructuring intergovernmental fiscal systems. Political decentralization aims to give citizens or their elected representatives more power in public decisionmaking.
If local governments and private organizations are to carry out decentralized functions effectively, they must have an adequate level of revenues, either raised locally or transferred from the central government, as well as the authority to make decisions. It is intended primarily for policymakers, in this case meaning civil servants and their. First, economic growth is often cited as a major objective of fiscal decentralization bahl and linn 1, bird and wallich 4, oates. In table 2 and table 3, the nonlinear effect of fiscal decentralization and corruption on urbanrural income. Pdf concept of fiscal decentralization and worldwide overview. Discusses fiscal decentralization and economic development in developed and developing countries. It provides an overview of fiscal decentralization for undp officers involved in policy debates on restructuring intergovernmental fiscal. Abstract tanzania is currently implementing a local government reform aimed at improving public service delivery. In this context, fiscal rules and institutions provide a useful framework but not necessarily a solution to this challenge.
Explores historical trends in fiscal centralization and puts them in context of the developing countries. 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. They conclude that while the results are rather mixed across these areas the research tends to. Decentralization or decentralisation see spelling differences is the process by which the activities of an organization, particularly those regarding planning and decision making, are distributed or delegated away from a central, authoritative location or group concepts of decentralization have been applied to group dynamics and management science in private. Expenditure assignment is the first step in designing an intergovernmental fiscal system. The current study covering the period from 1972 to 2009 is an attempt to find out the impacts of fiscal decentralization on public services deliveries in. Bird and francois vaillancourt recent years have seen worldwide interest in. Fiscal decentralization in developing countries download. This paper deals with ghana experience in fiscal decentralization.
Fiscal decentralization is the devolution of fiscal assignments to lower governments for high growth and better delivery of public services. In this paper, the impact of fiscal decentralization on chinas environmental quality is investigated both theoretically and empirically. Hence, it is unreliable that there exist sample linear effects of both chinese fiscal decentralization and corruption on urbanrural income inequality. A global perspective as scores of countries have introduced plans to devolve powers and resources from central to subnational governments in recent decades, the causes and consequences of political decentralization have caught the interest of political economists. Annals of economics and finance 1, 151 2012 fiscal decentralization in china. Fiscal decentralization has often been adopted by african states since the onset of the new public management era in an effort to improve the standard of governance. History, impact, challenges and next steps chunli shen cema, central university of finance and economics, beijing, china. It examines whether the design has been coherently formulated and preconditions for decentralization have been put in place. Fiscal decentralisation introduction the second part of the morning will introduce fiscal decentralisation and own revenues as a way to strengthen accountability.
In principle, fiscal decentralization requires devolution of decisionmaking power to local governments to determine revenues and expenditures and to the citizens of municipalities to elect local public officials. 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. Fiscal decentralisation in developing countries essons for. Theories of secondgeneration fiscal federalism will be discussed and the four pillars of intergovernmental finance1 expenditure responsibilities. Similarly, stronger fiscal incentives are also associated with greater reform in stateowned enterprises, as measured by the increased shares of contract workers in the total state employment and bonuses in total employee wages. The growth dimension of fiscal decentralization is emphasized for two reasons. 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. Fiscal decentralization and the efficiency of public service.
Pdf assessment of fiscal decentralization influence on. Designing revenue and transfer components of a decentralized interg. In terms of decentralization as a process of change, and according to the level of transfer of responsibilities, it is useful to distinguish between deconcentration, delegation and devolution. However, this attempt to revamp the financial interaction between the central and provincial governments. Decentralization policies in asian development download. The above quote drawn from a recent undp document underscores the need to develop a better understanding of the concept. Political, administrative, fiscal and market decentralization, for example, can also appear in different forms and combinations within countries and even within sectors. Fiscal decentralization and local finance reforms in.
Fiscal decentralization and delivery of public services. There exists a stronger dynamic relationship among fiscal decentralization, corruption and income inequality in developing countries. Researchers empirically tested the various propositions of fiscal decentralization and this study is an addition in the literature while exploring the fiscal decentralization and gross investment nexus in case of pakistan. Fiscal decentralization and federalism data catalog. We test this proposition empirically on a sample of 23 oecd countries over the 19752000 period, and find. Mar 26, 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. Fiscal decentralisation in developing countries essons for bangladesh there is an ongoing debate in bangladesh in civil society and among policymakers, whether the country should move from a highly centralised unitary state to a more devolved entity. In this case, previously concentrated powers to tax and.
Fiscal decentralisation overseas development institute. One important factor in determining the type of fiscal decentralization is the extent to which subnational entities are given autonomy to determine the allocation of their expenditures. A realworld example of such a situation is mentioned by jin, qian and weingast 2001 when discussing the russian regionallocal government system. Fiscal decentralization fd, defined as the devolution of fiscal power and responsibilities to subnational governmental units, has been argued to improve democratic governance practices and thus to contribute to economic efficiency. This often leads to difficulty in maintaining fiscal discipline. This comes after a halfcentury of fiscal centralization in most. Fiscal decentralization fd means devolution of power and responsibilities of national. We employ data envelopment analysis on a panel of 21 oecd countries over the. Our analysis finds fiscal decentralization has a significant positive impact on the spending of residents livelihood other than the investment in infrastructure. When is fiscal decentralization good for governance.
It will be necessary for the agency hr and fiscal offices to work closely together to ensure that the fiscal aspects of entering an eparpa are appropriate and will be. When decentralization is broadened to incorporate such concepts as devolution, alternative services delivery, privatization and so on, then the resource base on the subject would undoubtedly be massive. This pdf is a selection from an outofprint volume from the national. In some states, the strength of subnational governments lies in their influence over the national policy making process, while in others it rests in their competence. The paper concludes with some observations on how to think about designing more appropriate and effective fiscal decentralization in developing countries. The adb south asia working paper series is a forum for ongoing and recently completed research and policy. This paper follows fiscal federalism that a higher degree of fiscal decentralization is always associated with lower corruption and income inequality. Achievements and challenges deribe assefa lecturer, ethiopian civil service university abstract as one of the major dimensions of decentralization reform program, fiscal decentralization has been a worldwide phenomenon since the 1980s and since 1991 in ethiopia. Fiscal decentralization fd means devolution of power and. Although it is yet to be systematically investigated where the initiative for fiscal decentralization came from, limited evidence suggests that decentralization offers great opportunities to improve the delivery of public services, and that the result depends on the type of decentralization that has been implemented and the institutions that implement it. An empirical analysis of fiscal decentralization on public.
The imfs fiscal decentralization dataset is updated annually, reflecting the latest gfs data available. Both in the industrialized and in the developing world nations are turning to devolution to improve the perfomance of their public sectors. The proximity of policy makers to the target groups reduces information and transaction costs of identifying the poor and helps in designing potentially successful capacity improving and safety net policies. Fiscal decentralization and particularistic spending. The findings suggest that a larger share of decentralized expenditure is associated with a stronger fiscal balance. Based on the panel dataset from 1999 to 2012, this research is focusing on china. This fiscal decentralisation paper forms part of a series of introductory guides on key topics in. Developed countries are reshaping their intergovernmental. South asia working paper series asian development bank.
Fiscal decentralization can also obstruct the redistribution role of the central government. Evidence from oecd countries abstract this paper attempts to identify the effect of fiscal decentralization on public sector efficiency pse. This paper explores the impact of fiscal decentralization on fiscal policy performance in a large sample of advanced and developing economies. Fiscal decentralization involves shifting some responsibilities for expenditures andor revenues to lower levels of government. Decentralization resulting difficulties in a coherent implementation in hq across clusters and in rosrds due to their constitutional status has wide freedom of action and it is a potential challenge consistent implementation across the organizationtools to handle the challenges. An indepth analysis of the fundamental role that decentralization plays in developing countries, using detailed statistical data to examine the actual fiscal structure between tiers of government, and the effects of decentralization at the local, national and international levels. Fiscal rules binding on all levels can help sustain political commitment in countries having coalitions or fragmented regimes in power. The impact of fiscal decentralization on accountability. Socalled soft budget constraints allow these subnational governments to expand expenditures without facing the full cost. 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. Fiscal decentralization and the efficiency of public service delivery. Until now, however, there has been little understanding of how decentralization leads to large fiscal deficits and macroeconomic instability.
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