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. Delayering often involves decentralization from middle management to line managers. Fiscal decentralization and propoor outcomes in viet nam 22. Thus, in this chapter, decentralization means both fiscal and political decentralization unless stated otherwise. Fiscal federalism constitutes the core and difficult area of federalism which measures the degree of division of powers among the constituent units of federations for. 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. Bird and francois vaillancourt recent years have seen worldwide interest in. Fiscal decentralization and mining taxation professor james m. China has a tradition of decentralization below the provincial level owing to close governmententerprise interaction at the county and township levels. The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies. An analysis of fiscal decentralization of upazila parishad. Decentralization is a concept that is not easy to define, and perhaps even harder to measure treisman, 2002.
The case study from central european countries fiscal decentralization is in vogue. Fiscal decentralization is often more a remedy than a development strategy. Fiscal decentralization can also obstruct the redistribution role of the central government. Fiscal decentralization and the efficiency of public service. Empirical work examining the effects of fiscal decentralization on income inequality has generally shown a conditional negative relationship between income inequality and fiscal decentralization. On the theory and practice of fiscal decentralization wallace e.
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 decentralization determinants and local economic development in eu countries anca florentina gavriluta vatamanu, florin oprea abstract this work aims to assess the impact of fiscal decentralization on local regional development in the eu member states while controlling for macroeconomic and local autonomy specific factors. The contribution of fiscal decentralization to regional inequality. Fiscal decentralization and the efficiency of public. Achievements and challenges of fiscal decentralization. Fiscal balance, the gst, and decentralization an opportunity for reform fraser institute digital publication october 2006 the percentage of provincial revenues provided by federal transfers varies from a low of 10. Commonly accepted objectives for fiscal decentralization include those of an efficient allocation of resources via a responsive and accountable government, an equitable. The decentralization and local governance strategy is the result of work undertaken by the social policy section of the unicef tanzania country of. For political aspects, see key sheet 12 on decentralisation and political accountability.
Fiscal decentralisation relates to the reassignment of expenditure or the transfer of funds and taxraising and borrowing powers pretorius and pretorius, 2008. On the theory and practice of fiscal decentralization. Conference on fiscal decentralization sponsored by the imf fiscal affairs department fad imf headquarters, washington, d. Expenditure assignment is the first step in designing an intergovernmental fiscal system. Ebel and serdar yilmaz abstract the typical postbretton woods era development approach that put. 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. It is also concerned with how to deal with any fiscal imbalance, which results from the devolution of expenditure responsibilities and taxes. Fiscal decentralization in south africa fiscal division of powers as demonstrated in table 16. However, the focus of this study is on fiscal decentralization and financial management of upazila parishads in bangladesh.
First, economic growth is often cited as a major objective of fiscal decentralization bahl and linn 1, bird and wallich 4, oates. View fiscal decentralization research papers on academia. The political, governance, and servicedelivery dimensions of decentralization a decentralization initiative as wideranging as pakistans has political, governance, and. Decentralization is an extensive progression and can be further segmented into administrative, political, and fiscal decentralization. Assessment of fiscal decentralization influence on social and economic development. 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. It is therefore worth revisiting what we know about political and. It provides an overview of fiscal decentralization for undp officers involved in policy debates on restructuring intergovernmental fiscal systems. This fiscal decentralisation paper forms part of a series of introductory guides on key. This case is based on an improved allocation of resources in the public sector. India, on the other hand, is a large federal democratic polity, but fiscal decentralization extends only up to the state level. While we note the relations between fiscal, administrative, and political decentralization, this subject is not discuss ed in detail here. A restructuring of a functional structure to a productbased structure will generally involve some degree of decentralization, especially regarding operational but not strategic matters. There are three indicators generally used in empirical studies on this subject, i.
In this case, previously concentrated powers to tax and. Decentralization is assuming larger proportions in the funds policy dialog with several member countries, and has featured centrally in a number of recent programs. To develop the argument, the article is organized in five sections. Fiscal decentralization and fiscal policy performance, wp1764. When is fiscal decentralization good for governance. The growth dimension of fiscal decentralization is emphasized for two reasons. Government privatizes or deregulates private functions. Measuring decentralization and the local public sector. Opportunities and risks of fiscal decentralization. Decentralization is a complex and multifaceted concept that spans fiscal, political, and administrative dimensions. Fiscal decentralization involves shifting some responsibilities for expenditures andor revenues to lower levels of government. 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. 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. 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.
In fact, fiscal decentralization has many proponents, in particular as a strategy to improve service delivery at local level. Annals of economics and finance 1, 151 2012 fiscal decentralization in china. Fiscal decentralization also implies that local governments will be assigned functional. Income inequality, fiscal decentralization and transfer. The findings suggest that a larger share of decentralized expenditure is associated with a stronger fiscal balance. Fiscal decentralisation overseas development institute. Fiscal decentralisation in developing countries chr. A number of quantitative and qualitative measures have been used in attempts to reliably measure the level of political, administrative, andespeciallyfiscal decentralization across countries.
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 provides an overview of fiscal decentralization for undp officers involved in policy debates on restructuring intergovernmental fiscal. The imfs fiscal decentralization dataset is updated annually, reflecting the latest gfs data available. 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. Overview of the debate over the last few years the debate on decentralisation has focused on. Oates the traditional theory of public finance has made a strong case for a major role for fiscal decentralization. A new approach to an old idea paul smoke massachusetts institute of technology, cambridge, massachusetts, u. Fiscal decentralization and the challenge of hard budget constraints edited by jonathan rodden, gunnar s. Fiscal federalism and national unity urban institute.
Definition of fiscal decentralization fiscal decentralisation is a transfer of responsibility for fiscal policies from the national level to the region, subregion, or local levels it should be assessed according to the degree of autonomy in designing, delivering and financing spending programs deconcentration, delegation, devolution. 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. Decentralization financial definition of decentralization. Fiscal decentralization and the challenge of hard budget. The allocation of policy competences, a key characteristic of the ue, is the object of section 6. This key sheet deals mainly with the administrative and fiscal aspects of decentralisation. These are important components of unicef s overall subnational engagement in the country.
Section 3 then proceeds with a discussion of the theoretical literature on fiscal decentralization and horizontal government competition. Fiscal decentralisation kenneth davey introduction fiscal decentralisation comprises the financial aspects of devolution to regional and local government. In fact, household mobility across local jurisdictions, like in the united states, hardly exists elsewhere. Fiscal decentralisation, the devolution of taxing and spending powers to lower levels of government, has become important to governance in. Pdf concept of fiscal decentralization and worldwide overview. Fiscal balance, the gst, and decentralization an opportunity for reform fraser institute digital publication october 2006 a 3step plan for reform step 1. The classical principles for decentralization design are well traveled across countries and over time.
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. Fiscal decentralization is concerned with who collects what taxes and who undertakes expenditures. It is therefore worthrevisiting what weknowabout politicalandeconomic institutions to understand how and under what circumstances decentralization can be beneficial. On the measurement and impact of fiscal decentralization 1 on the measurement and impact of fiscal decentralization robert d. Ddecentralization and ecentralization and llocal governance. Hankla many developing countries are seeking to improve governance with fiscal decentralization. Conference on fiscal decentralization november 2021, 2000.
Although political, administrative, and fiscal decentralization models are related, most articles focus on one. Many developing countries are seeking to improve governance with fiscal decentralization. Fiscal decentralisation, efficiency, and growth request pdf. In this context, six key questions arise in respect to intergovernmental finance. The paper presents ideas for a fiscal decentralization roadmap that are grounded in the countrys context, and that build on existing structures and reforms. Fiscal decentralization enters into poverty alleviation strategy in a number of ways. Both in the industrialized and in the developing world nations are turning to devolution to improve the perfomance of their public sectors oates, 1999. Designing revenue and transfer components of a decentralized interg. It is intended primarily for policymakers, in this case meaning civil servants and their. Lewis harvard institute for international development, cambridge, massachusetts, u. In this case, previously concentrated powers to tax and generate revenues are dispersed to other levels of government, e. This fiscal decentralisation paper forms part of a series of introductory guides on key topics in. Understanding the context of fiscal decentralisation.
This introductory guide focuses particularly on the challenges and opportunities of fiscal decentralisation. Otto abstract mineral sector reform efforts have been initiated in many nations during the past decade. A realworld example of such a situation is mentioned by jin, qian and weingast 2001 when discussing the russian regionallocal government system. Fiscal decentralization, fiscal incentives, and propoor outcomes. The political, governance, and servicedelivery dimensions of decentralization a decentralization initiative as wideranging as pakistans has political, governance, and servicedelivery dimensions. This comes after a halfcentury of fiscal centralization in most. Thus, in this chapter, decentralization means both fiscal. Developed countries are reshaping their intergovernmental. 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. A note on budget data unless otherwise indicated, all data used in this report are those made available to the general public. 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. Idg policy brief fiscal decentralization in kenya 2 given these various perceptions, at this stage, it remains to be seen whether the implementation of the constitution will bring about a sea change in intergovernmental fiscal relations and public empowerment, or whether the changes in kenyas intergovernmental structure. These efforts have resulted in new mining regulatory regimes in over 100 nations.
Fiscal decentralization, equalization and intra relationship depends on various conditions such as the development level of a country and the presence of solid. Why decentralize expenditure and revenue responsibilities. Fiscal decentralisation comprises the financial aspects of devolution to regional and local governments. History, impact, challenges and next steps chunli shen cema, central university of finance and economics, beijing, china. The views expressed in this publication are those of the authors and do. Pdf assessment of fiscal decentralization influence on. Ebel 21 institutions of federalism and decentralized government 521 brian galligan index 545 vi handbook of fiscal federalism. Thus, to analyze whether fiscal decentralization affects poverty reduction, it is necessary to look at the most appropriate pathway and indicators of fiscal decentralization.
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