Fiscal Federalism and Government Size in Transition Economies: The Case of Moldova

IMF Working Papers, December 1, 1999

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Fiscal Federalism and Government Size in Transition Economies: The Case of Moldova

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Bibliographic details

• Published: December 1, 1999
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451858792.001

Summary

• The paper examines the relationship between fiscal decentralization—the assignment of revenue sources and expenditure functions across government levels—and government size in Moldova.
• Empirical results are based on data for a cross-section of Moldovan subnational governments in 1998.
• Key finding: fiscal decentralization is associated with larger subnational governments.
• The country’s revenue-sharing system imposes a constraint on subnational spending.
• Moldova is undergoing unprecedented reform of its system of intergovernmental fiscal relations and consolidation of its local government.
• The reform package is described as crucial to ensure that decentralization does not increase the size of government.

Empirical findings and technical points

• Data source: cross-section of Moldovan subnational governments in 1998.
• Main empirical association reported: fiscal decentralization ↔ larger subnational governments.
• Constraint mechanism identified: the revenue-sharing system limits subnational spending.
• Subject tags in the paper include: Expenditure, Fiscal federalism, Fiscal policy, Revenue administration, Revenue sharing, Taxes, Total expenditures.
• Keywords listed: budget imbalance, expenditure function, fiscal federalism, government, government size, indicators of decentralization, Moldova, national government, nontax revenues from the revenue estimate, public goods, revenue mobilization capacity, Revenue sharing, revenue-mobilization capacity, road tax, sharable revenue, State budget, Total expenditures, WP.

Policy implications and recommendations

• Ongoing reform of intergovernmental fiscal relations and consolidation of local government are central policy actions highlighted.
• The reform package aims to ensure that decentralization does not increase the size of government.

Content in this bundle

• Fiscal Federalism and Government Size in Transition Economies: The Case of Moldova - WP/99/176
  • Fiscal Federalism and Government Size in Transition Economies: The Case of Moldova - WP/99/176 (Markdown version)
  • Fiscal Federalism and Government Size in Transition Economies: The Case of Moldova - WP/99/176 (PDF)