IMF Working Papers

Designing Sound Fiscal Relations Across Government Levels in Decentralized Countries

By Robin Boadway, Luc Eyraud

December 10, 2018

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Robin Boadway, and Luc Eyraud. Designing Sound Fiscal Relations Across Government Levels in Decentralized Countries, (USA: International Monetary Fund, 2018) accessed November 8, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper discusses how decentralized countries can achieve sound fiscal relations between the central government and lower government levels. The concepts of “vertical gap” and “vertical balance” provide an analytical framework for identifying and addressing key challenges. These concepts can help policymakers ensure that the financing of subnational governments (composed of transfers received from the center, own revenues, and borrowing) is both efficient and adequate given the allocation of spending responsibilities. More generally, the paper offers some perspectives about the optimal design of decentralization systems by examining the sequencing and economic principles underlying revenue and expenditure assignments, the use of transfers, and borrowing.

Subject: Expenditure, Fiscal federalism, Fiscal policy, Fiscal stance, Labor, Public employment, Revenue administration

Keywords: Europe, Expenditure responsibility, Fiscal balance, Fiscal federalism, Fiscal stance, Government arrears, Government health, Government policy, Infrastructure project, National government, Northern Europe, Public employment, Revenue decentralization, State revenue, Subnational government, Vertical gap, Vertical imbalance, WP

Publication Details

  • Pages:

    44

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2018/271

  • Stock No:

    WPIEA2018271

  • ISBN:

    9781484387788

  • ISSN:

    1018-5941

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