Designing Sound Fiscal Relations Across Government Levels in Decentralized Countries

Author/Editor:

Robin Boadway ; Luc Eyraud

Publication Date:

December 10, 2018

Electronic Access:

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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.

Series:

Working Paper No. 18/271

Subject:

English

Publication Date:

December 10, 2018

ISBN/ISSN:

9781484387788/1018-5941

Stock No:

WPIEA2018271

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

44

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