George break 1967 the mobility of individual economic units among different localities places. Fiscal decentralization and economic growth sciencedirect. Fiscal decentralisation, efficiency, and growth request pdf. Theory as reform james edwin kee the federal system was created with the intention of combining the different advantages which result from the magnitude and the littleness of nations. Fiscal decentralization is the devolution by the central government to local governments states, regions, municipalities of specific functions with the administrative authority and fiscal revenue to perform those functions. Oecd ilibrary maintaining the momentum of decentralisation. It argues that in a context where institutional capacity is weak, democratic institutions are fragile and resources are scarce, caution is needed. A fair summary of the empirical search for a direct relationship between fiscal decentralization and economic growth. 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. Vertical and horizontal decentralization and ethnic diversity. First we will look at the main features of fiscal decentralisation in south africa and assess its impact on the major components of social expenditure. Our central interest in this paper is to examine how fiscal decentralisation is articulated to address the leading social disparities in south africa.
However, in terms of fiscal decentralization, legal provision of nepal is strong while local government seems ineffective and weak. Second, federalism is associated with worse perceptions. This article argues that there is no simple or even complex uniform model for fiscal decentralisation in africa. The paper concludes with some observations on how to think about designing more appropriate and effective fiscal decentralization in. 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. First, there is a generation gap to switch form manual to electronic. Fiscal decentralization policies can assume different institutional forms. This introductory guide focuses particularly on the challenges and opportunities of fiscal decentralisation.
Bird and francois vaillancourt recent years have seen worldwide interest in. Much less attention has been devoted in the literature to the indirect channels through. An increase of transfers from the central government, the creation of new subnational taxes, and the delegation of tax authority that was previously national are all examples of fiscal decentralization. The broader lesson is that while general fiscal decentralisation research tends to imply that its conclusions are valid for all policy areas in a similar way, sector. Fiscal decentralization indicators this note contains the documentation on the database of fiscal decentralization indicators that are mainly derived from imfs government finance statistics gfs. Fiscal decentralization involves shifting some responsibilities for expenditures andor revenues to lower levels of government. 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. Sequencing fiscal decentralization world bank group. Fiscal decentralization george washington university. Fiscal decentralization may indeed have a direct impact on economic growth but the theoretical underpinnings for this relationship remain largely undeveloped. Understanding the context of fiscal decentralisation.
In vertical decentralization, the central government is the principal, the local government is the agent. This multilevel governance series study focuses on ukraines advances in regional development, territorial reform and decentralisation since 2014. Lse europe in question discussion paper series fiscal. Decentralization financial definition of decentralization. The quick research by the committee revealed that the governments of kenya and south africa have been implementing fiscal decentralisation. Achievements and challenges of fiscal decentralization lessons from mexico edited by marcelo m. That is, a convergence of revenue and expenditure assignments at subnational levels of government should, according to the theory, be positively associated with a higher growth rate. Facilitating responsible credit market access to subnational governments. Designing fiscal transfers to ensure regional fiscal equity and to create an enabling environment for innovative and competitive service delivery. In horizontal decentralization, the community is the principal, the local government is the agent.
Fiscal decentralization, revenue and expenditure assignments. Fiscal decentralization in a for the asia foundation. The main objective of this paper is to study the concept of fiscal decentralisation and the influence of fiscal decentralisation on economic growth in selected european union countries during the. Achievements and challenges of fiscal decentralization. Therefore, the remainder of this turns to the empirical analysis of these issues. Advantages of centralisation advantages of decentralisation a fixed set of rules and procedures in all areas of the firm should lead to rapid decisionmaking.
In this way, we obtained a result for the analyzed countries european union member states in the form of determinable levels of fiscal decentralization, whereby cifds indicators alone point to higher or lower levels of fiscal decentralization system compliance with. The achievements made as a result of the implementation of the policy in the two countries and indeed various literature, point to the fact that fiscal decentralisation enhanced the knowledge of local needs and preferences,which were specific to a locality. Fiscal decentralisation in developing countries essons for. Wide approaches swaps and a gradual merging of scattered bilateral district. 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 decentralisation in the eu main characteristics and implications for fiscal outcomes summary in recent years, eu policymakers have increasingly raised the concern that the behaviour of subnational governments may be one of the factors hindering the achievement of budgetary targets at general government level. Fiscal decentralization and the efficiency of public service. Testing the boundaries of zimbabwes fiscal decentralisation. Fiscal decentralisation and subnational finance oecd.
Both types of decentralization need to be examined in the context of the subsaharan reality which includes considerable ethnic diversity. Pdf on jul 12, 2018, hansjorg blochliger and others published fiscal decentralisation and economic growth find, read and cite all the research you need on. In fact, fiscal decentralization has many proponents, in particular as a strategy to improve service delivery at local level. Published in cesifo dice report, journal for institutional comparisons volume 2, no. Theory suggests that a close match between revenue and expenditure assignments at subnational levels benefits allocative efficiency, and hence economic growth. Designing institutional arrangements for intergovernmental fiscal relations to better coordinate policies. 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. Belgium, australia, germany, spain, switzerland and canada. Information is provided on devolved tax powers, subcentral borrowing powers and fiscal transfer arrangements. Fiscal decentralisation has a more ambiguous effect on inequality than on growth, especially for economies with a higher degree of openness. Pdf different forms of decentralization and their impact. The article proposes an analytical framework to help countries consider how to structure fiscal decentralisation. Six regions have been merged with their larger neighbours, and the merger.
None of the present work has been submitted previously for any degree or examination in any other university. Fiscal decentralisation and the quality of public services in. This paper examines the theory behind fiscal decentralization and suggests. I declare that testing the boundaries of zimbabwes fiscal decentralisation for urban councils is my own work. Commonly accepted objectives for fiscal decentralization include those of an efficient allocation of resources via a responsive and accountable government, an equitable. A fair summary of the empirical search for a direct relationship between fiscal decentralization and economic growth is that it remains an open question. To conclude, fiscal decentralization is a way to transfer the power of central government to local level and make them responsible. A normative approach may take the political structure as given and then see what economic consequences result. In this case, previously concentrated powers to tax and.
In this case, previously concentrated powers to tax and generate revenues are dispersed to other levels of government, e. Fiscal decentralization can also obstruct the redistribution role of the central government. Fiscal decentralization and economic growth in central and. It is intended primarily for policymakers, in this case meaning civil servants and their. An economic theory of fiscal decentralization charles m. Its goal is to inform policy makers, civil society, political parties, and international development partners of principles and processes to guide fiscal decentralization policy. The achievements made as a result of the implementation of the policy in the two countries and indeed various literature, point to the fact that fiscal decentralisation enhanced the knowledge of local needs and preferences,which were specific to a. In a short period, successful steps have been taken toward achieving municipal mergers and.
In this way, we obtained a result for the analyzed countries european union member states in the form of determinable levels of fiscal decentralization, whereby cifds indicators alone point to higher or lower levels of fiscal decentralization system compliance with the selected fundamental principles of the eclsg. Goals, dimensions, myths and challenges paul smoke new york university, new york, usa summary decentralisation is a complex and often somewhat elusive phenomenon. It provides an overview of fiscal decentralization for undp officers involved in policy debates on restructuring intergovernmental fiscal systems. In section 2, i provide a short overview of the main features of decentralisation in uganda, including political, administrative. Spending versus revenue decentralization norman gemmell, richard kneller and ismael sanz. Fiscal decentralisation overseas development institute. It provides an overview of fiscal decentralization for undp officers involved in policy debates on restructuring intergovernmental fiscal.
This comes after a halfcentury of fiscal centralization in most developed and developing nations. A policy of fiscal decentralization is directed towards the transfer of fiscal powers and responsibilities from the national to subnational governments sngs. 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. The federal system was created with the intention of combining the different. Government privatizes or deregulates private functions. Complete answers on the impact of fiscal decentralization are not likely to be. Fiscal decentralisation kenneth davey introduction fiscal decentralisation comprises the financial aspects of devolution to regional and local government. Autonomy later merged into the ministry of home affairs was commissioned to draw up the law describing the new assignment of. Jul 11, 2014 the quick research by the committee revealed that the governments of kenya and south africa have been implementing fiscal decentralisation. While fiscal centralization is often a response to the demands of national unity, fiscal decentralization may be seen as a response to the demands for. More local decisions can be made which reflect different conditions the managers who take decisions will have local knowledge and are likely to have closer contact with consumers. Maintaining the momentum of decentralisation in ukraine. The question of combining the implementation of the new aid agenda with the challenges.
Second, we merge the grd data with the international monetary funds imfs gfs data. Developed countries are reshaping their intergovernmental. All citations, references and borrowed ideas have been duly acknowledged. Pdf fiscal decentralisation and economic growth researchgate. Fiscal devolution some comparative examples 1 december 2014 1488 scherie nicol this briefing provides an overview of fiscal devolution in the following countries. Included are some useful tables on availability and the types of indicators included as. Fiscal decentralization in developing and transition.
July 2005 understanding fiscal decentralisation in south africa. Wider working paper 2016172 fiscal decentralization. Maintaining the momentum of decentralisation in ukraine en. A study of local government taxation in tanzania oddhelge fjeldstad and joseph semboja published in forum for development studies, vol. Lse europe in question discussion paper series fiscal decentralization and economic growth in central and eastern europe andres rodriguezpose and anne kroijer leqs paper no. The oecd fiscal decentralisation database provides comparative information on the following indicators analysed by level of government sector federal or central, including social security, stateregional and local, for oecd member countries between 1965 and 2018. The government launched a reform to merge local governments and strengthen the decentralisation process, giving additional power and resources to subnational authorities. Fiscal decentralisation relates to the reassignment of expenditure or the transfer of funds and taxraising and borrowing powers pretorius and pretorius, 2008. In a short period, successful steps have been taken toward achieving municipal mergers and greater fiscal. Principles of decentralization thomas courchene, jorge martinezvazquez, charles e. Moreover, for some countries, there is an apparent tradeoff between growth and equity, when it comes to the optimal degree of spending and revenue decentralisation. 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. First, fiscal and administrative decentralization improve perceptions of government performance. 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.
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