Measuring Fiscal Decentralization: Exploring the IMF’s Databases

IMF Working Papers, June 1, 2011

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Conventional wisdom postulates that there are benefits from decentralizing government finances but there is little empirical evidence about actual country practices.
This paper presents data on fiscal decentralization for about 80 countries over a period of about 20 years (1990-2008) from the IMF’s Government Finance Statistics Yearbook (GFSY), the only global database with fiscal data for several levels of government.
The data show that in many countries, revenue collection remains relatively more centralized than expenditures and that employment tends to be concentrated in lower levels of government.
Except for transition economies, the levels of decentralization are relatively stable over the time period.
The findings are shown by degree of economic development, constitutional power arrangements, and geographic area, broadly confirming key factors identified in the literature as determining the extent of fiscal decentralization.

Data source: IMF’s Government Finance Statistics Yearbook (GFSY).
Country coverage: about 80 countries.
Time coverage: 1990-2008.
Variables emphasized: revenue collection, expenditures, employment across levels of government.
Cross-sectional disaggregation: degree of economic development, constitutional power arrangements, geographic area.

Revenue-versus-expenditure distribution:
- Revenue collection remains relatively more centralized than expenditures in many countries.
Government employment:
- Employment tends to be concentrated in lower levels of government.
Temporal stability:
- Except for transition economies, levels of decentralization are relatively stable over the 1990-2008 period.
External validation:
- Results broadly confirm key factors identified in the literature as determinants of the extent of fiscal decentralization.

Subject: Economic and financial statistics, Employee contributions, Expenditure, Fiscal federalism, Fiscal policy, Government finance statistics, Revenue administration, Taxes
Keywords: a number of country, Africa, central government, country, country case studies, country example, decentralized country, Employee contributions, fiscal centralization, Fiscal federalism, General government, government, government finance statistic, government finance statistics, government level, indicated number country, intra government grant, public goods, standard deviation, tax effort, WP