Much of the literature on decentralization, normative and empirical, is based on industrial countries. Given that the world banks work is exclusively in developing countries, it must careful. The revenue dimension of fiscal decentralization in south africa is the subject of this paper. Using our merged dataset, we construct two variables for fiscal decentralization one. The term fiscal decentralization also requires definition. Introduction the international integration of markets and the decentralization of authority within nation states are two defining trends of the contemporary era. This diversity creates challenges to measure and compare the degree of decentralization across countries and to make. The contribution of fiscal decentralization to regional. Framework for assessing intergovernmental fiscal relations 32. Development from below studies in fiscal federalism and statelocal finance series.
We use a panel data set of 46 countries over the 19701989 period to investigate the relationship between fiscal decentralization and economic growth. Pdf fiscal decentralization in developing countries. Pdf rethinking decentralization in developing countries. Developing nations, however, have ver y dif fer ent insti tutional frameworks. Ingram and yuhung hong achieving decentralization objectives 17 2. Bird and francois vaillancourt recent years have seen worldwide interest in.
A broader view of fiscal decentralization in developing. Income inequality, fiscal decentralization and transfer. Fiscal decentralization and intergovernmental fiscal. We find a negative relationship between fiscal decentralization and growth in developing countries, but none in developed countries. Fiscal decentralisation overseas development institute. 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. In particular, many developing countries are turning to various forms of fiscal decentralization as an escape from inefficient and ineffective governance, macroeconomic stability, and inadequate growth.
Fiscal decentralization means decentralizing revenue raising andor. This study focuses on the relationship between fiscal decentralization and icrg index of corruption risk in both categories of emerging and developing countries, using a sample of 38 countries for the period 20002014. Subnational expenditures in developing countries as a percentage of total public expenditures have also increased over the past two decades. Decentralization financial definition of decentralization. Decentralization in developing economies lucie gadenne monica singhal march 2014 abstract standard models of fiscal federalism suggest many benefits of decentralization in developing economies, and there has been a recent push toward decentralization around the world. New development of fiscal decentralization in china. However, developing countries presently still have less. Fiscal decentralization in east and southern africa. In countries that have decentralized to offload fiscal imbalances from the. Despite the regions many successes, it remains home to twothirds of the worlds poor. The focus in this chapter is on what the empirical evidence tells us about why countries have decentralized and what the impact of fiscal decentralization has been. An analysis of the effect of fiscal decentralisation on. Fiscal decentralization indicators this note contains the documentation on the database of fiscal decentralization indicators that are derived from imfs government finance statistics gfs.
Development from below studies in fiscal federalism and statelocal finance series roy bahl, richard m. Global perspectives on the obstacles to fiscal devolution studies in fiscal federalism and statelocal finance martinezvazquez, jorge, vaillancourt, francois on. Opportunities and risks of fiscal decentralization. While there were a wave of mergers of companies trying to corner markets. Developed countries are reshaping their intergovernmental. Global perspectives on the obstacles to fiscal devolution studies in fiscal federalism and. The extensive literature about the theory and practice is surveyed, and longstanding problems and new questions are addressed. Financial responsibility is a core component of decentralization. Fiscal decentralization in a for the asia foundation.
The virtues and reality of decentralizing governance in developing countries have been the subject of vigorous debate since that time, and the fiscal aspect of decentralization has. On the other hand, without fiscal decentralisation, political and. 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. This paper surveys fiscal policy in developing countries from the point of view of longrun growth. Countries are reconsidering their fiscal systems and searching for the right balance between central government control and decentralized governance. General challenges for decentralization in developing countries. Fiscal decentralization in developing and transition economies progress, problems, and the promise by anwar shah1 world bank washington, dc usa world bank policy research working paper 3282, april 2004 the policy research working paper series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. Pdf on jan 1, 2000, paul smoke and others published fiscal decentralization in developing countries. Social institutions and dialogue august 2004 devdoc200405. Fiscal decentralization and local finance in developing. Pdf on jan 1, 2018, roy bahl and others published fiscal decentralization and local finance in developing countries find, read and cite all the research you need on researchgate. Included are the types of indicators included as well as some guidance on how to use and how not to use the indicators as well as where to find the information.
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 about expenditures. Fiscal decentralization and economic growth sciencedirect. However, a closer examination of the consequences of decentralization across countries reveals that, despite the implementation of apparently similar reforms, their. In this paper, we describe the system of local government and local government finance in south africa. Its mission is to help its developing member countries reduce poverty and improve the quality of life of their people. However, developing countries presently still have less decentralization, particularly on the revenue side, than both developed countries today and the united states. There appears to be an increasing trend in worldwide fiscal decentralization. Although political, administrative, and fiscal decentralization models are related, most. Fiscal decentralization in developing and transition economies. Fiscal decentralization and intergovernmental fiscal relations.
In the last two decades, over eighty five countries all around the world have embarked on. Measuring fiscal decentralization as the share of subnational expenditure in total government expenditures, they estimate the effect of fiscal decentralization on income inequality conditional on the size of government with findings. Fiscal decentralization consists primarily of devolving revenue sources and expenditure functions to lower tiers. About the asian development bank fiscal decentralization. Empirical evidence to justify or discredit the pursuit of fiscal decentralization in developing countries is scant and mixed.
An overview edited by professors bird and vaillancourt and. This is the case of davoodi and zou 1997, who conclude that fiscal decentralization is negatively correlated to economic growth in developing countries, but has no significance in developed countries. In countries that have decentralized to offload fiscal study of russia litvack. The aim is to focus on expenditure and revenue decentralization giving importance to the effects of subnational revenue mobilization on this correlation as. Fiscal decentralisation in developing countries essons for. The impact of fiscal and political decentralization on local public. The last decade has seen a renewed interest in the concept of fiscal decentralization or fiscal federalism. Poland, slovakia, czech rep, estonia, hungary, etc. Globalization and fiscal decentralization geoffrey garrett and jonathan rodden1 i.
The nexus of fiscal decentralization and land policies 3 gregory k. Fiscal decentralization in developing countries semantic scholar. Brazil, which moved in this direction after their constitutional reform of 1988. Pdf the author discusses the revolution in public sector thinking that is transforming the. The paper concludes with some observations on how to think about designing more appropriate and effective fiscal decentralization in. None of the claims on either extreme that fiscal decentralization retards economic development and has a variety of undesirable macroeconomic effects. This comes after a halfcentury of fiscal centralization in most developed and developing nations. Wider working paper 2016172 fiscal decentralization. Our particular focus is on fiscal decentralization in developing countries. The main issues of concern regarding fiscal decentralization and. Rethinking decentralization in developing countries. In particular, many developing countries are turning to various forms of fiscal. Fiscal decentralization in developing countries, edited by professors bird and vaillancourt and featuring important, original, and uptodate research from leading scholars, assesses the progress, problems, and potentials of.
This paper examines the theory behind fiscal decentralization and suggests the reasons for its renewed popularity. Political decentralization has advanced in most countries. Fiscal decentralization and intergovernmental transfers in. Fiscal decentralization in developing and transition. A popular speculation is that globalization has caused a. The legal system allows cooperation and mergers between subnational. Fiscal decentralization in asia challenges and opportunities jorge martinezvazquez fiscal decentralization in asia. As a typical transition economy and an important representative of developing countries, the large size territory.
Distribution of conditional transfers contents acknowledgements 3 1. Pdf fiscal decentralization in developing and transition. As economic and political pressures for fiscal decentralization escalate and forces driving democratization develop, many countries will feel increasing pressure to decentralize. Standard models of fiscal federalism suggest many benefits of decentralization in developing economies, and there has been a recent push toward decentralization around the world. The paper concludes with some observations on how to think about designing more appropriate and effective fiscal decentralization in developing countries. The extensive literature about the theory and practice is surveyed and longstanding problems and new questions are addressed. Fiscal decentralization and corruption in emerging and. Given that the w orld bank s work is exclusively in developing countries, it must careful.