Decentralizing Spending More Than Revenue: Does it Hurt Fiscal Performance?
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Summary:
In many countries the decentralization of spending responsibilities has outpaced the decentralization of revenue powers. Sub-national governments have then to rely on transfers from the center and borrowing to finance their spending. When this occurs, we find that the overall fiscal deficit tends to increase. This result is based on cross-country econometric evidence from OECD countries, and is particularly strong in the presence of regional disparities. Fiscal discipline can be strengthened by ensuring that sub-national taxing powers are adequate to meet spending obligations.
Series:
Working Paper No. 2011/226
Subject:
Expenditure Fiscal policy Fiscal stance General government spending Public debt Public financial management (PFM)
English
Publication Date:
September 1, 2011
ISBN/ISSN:
9781463904944/1018-5941
Stock No:
WPIEA2011226
Pages:
33
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