Effect Of Fiscal Decentralization Research Articles

The Effect of Fiscal Decentralization, Human Development Index (HDI), and Poverty Rate on Income Disparity in Sumatra Provinces

Income disparity is defined as the discrepancy in income distribution between different communities. The existence of high and low income levels can serve as a benchmark for a country, regardless of whether it is classified as developed or developing. The impact of income disparity has the potential to influence the sustainability of economic development at the regional and national levels. High income disparity has a deleterious effect on the political and economic stability of a country. This research employs a descriptive quantitative methodology. This research employs secondary data and panel data regression analysis tools. The data utilized in this study were procured from the Directorate General of Fiscal Balance and the Central Bureau of Statistics of all provinces within the Sumatra region. The research data set includes the Fiscal Balance Fund, the Human Development Index, the percentage of the population living below the poverty line, and the Gini Ratio Index for the past seven years, from 2017 to 2023. The findings of this study indicate that fiscal decentralization and poverty level exert a negative but insignificant influence on income disparity in the Sumatra region provinces. Conversely, the human development index exerts a negative and significant influence on income disparity in the same region.

The Impact of Fiscal Decentralization on Development Performance in West Kalimantan with Opportunistic Behavior as a Mediating Variable

This study aims to analyze the impact of fiscal decentralization on development performance in West Kalimantan Province with opportunistic behavior as a mediating variable. The background of this research is the importance of fiscal decentralization as a policy instrument to encourage regional development. However, there are concerns that opportunistic behavior in regional financial management can reduce the effectiveness of fiscal decentralization. The research method used is panel data analysis that combines time series and cross-section data from 14 districts/cities in West Kalimantan during the 2017-2022 period. The results of the study show that budget allocation does not have a significant influence on opportunistic behavior but has a significant positive effect on economic performance, while transfer funds actually increase fiscal opportunistic behavior and significantly negatively affect economic performance. In addition, opportunistic fiscal behavior has been proven to reduce regional economic performance. These findings underscore the importance of better fiscal management to minimize opportunistic behavior and maximize the benefits of fiscal decentralization.

Examining the Effects of Fiscal Decentralization and Income Inequality on the Economic Performance of West Sumatra Province, Indonesia

Examining the Effects of Fiscal Decentralization and Income Inequality on the Economic Performance of West Sumatra Province, Indonesia

Fiscal decentralization and the transformation of regional energy structures in China: Spatial spillover effects and the mediating role of technological innovation

The transformation of regional energy structures plays a pivotal role in enhancing ecological quality and advancing national green development efficiency. However, this transformation is characterized by dual externalities, necessitating governmental intervention to rectify market failures. Therefore, this study focuses on the critical influence and mechanisms through which local governments affect regional energy structure transformation, particularly within the context of China's unique fiscal decentralization. This study explores the impact of fiscal decentralization on the transformation of China's regional energy structures and its spatial correlations. Employing a bidirectional fixed-effect model and a spatial Durbin model, we analyze Chinese provincial panel data from 2002 to 2021 to explore the effects of fiscal decentralization on regional energy structure transformation and its spatial spillover. Findings reveal that fiscal decentralization significantly enhances the efficiency of regional energy structure transformation, with an effect coefficient of 0.127. Additionally, the fiscal decentralization mechanism positively influences spatial spillover effects on regional energy transformation, with these effects becoming more pronounced alongside higher degrees of economic agglomeration. Moreover, local governments are found to foster regional scientific and technological innovation, thereby facilitating adjustments in the regional industrial structure and promoting energy structure transformation. The intermediary effect test highlights the role of local governments in promoting scientific and technological advancements that drive industrial restructuring and energy transformation. The study recommends for a long-term strategy to balance central and local financial development, aiming to enhance the efficiency of regional energy structure transformation. These findings offer a theoretical foundation and policy recommendations for optimizing and transforming energy structures in pursuit of China's green and high-quality development goals. These findings offer globally relevant insights into leveraging fiscal decentralization for energy structure transformation, supporting sustainable development and green growth worldwide.

Governance and Fiscal Decentralisation in Latin America: An Empirical Approach

The objective of this study was to establish the relationship between certain institutional variables and the effectiveness of fiscal decentralisation in Latin America. To fulfil this objective, we took a sample of 15 Latin American countries for the years 1996 to 2020 to estimate the logarithm of GDP per capita based on the level of fiscal decentralisation, as well as its interaction with six institutional variables plus three control variables. The results show that institutional variables always modulate the effects of fiscal decentralisation, in most cases significantly and negatively, the exceptions being accountability with a positive result and government effectiveness with a non-significant result. It was concluded that in the presence of weak regulations, political conflicts, and corruption, fiscal decentralisation can worsen social or economic circumstances in Latin America.

The Contribution of Fiscal Decentralization and Natural Resources on Economic Growth in Indonesia: Does Corruption Hamper?

Objective –This study aims to explain the effect of fiscal decentralization and natural resources on economic growth in Indonesia; and the moderating role of corruption in both fiscal decentralization-economic growth and natural resources-economic growth nexuses.Methodology –This study uses quantitative approach by utilizing a moderated panel data regression analysis with cross-sectional observations of 34 provinces in Indonesia from 2011 to 2021.Results –Fiscal decentralization has no significant effect on economic growth, while natural resources positively affect economic growth. Furthermore, we found no moderating effect of corruption in the fiscal decentralization-economic growth nexus, but the weakening effect of corruption is evident in the natural resources-economic growth nexus. Research limitation/implications – To further encourage economic growth in the regional level, it is vital to impose budget composition requirements on regional governments in the framework of fiscal decentralization, particularly related to employee and capital expenditure; and to maintain the decentralization of natural resources management on the regional level, while continuing efforts on eradicating corruption.Novelty/Originality–Few researchers consider the role of corruption as a moderator in the relationship between fiscal decentralization and natural resources on economic growth. This study fills this gap by incorporating a moderating role of corruption that may weaken the ability of fiscal decentralization and natural resources to promote economic growth with the evidence from Indonesia’s provinces.

Pengaruh Desentralisasi Fiskal Terhadap Kemiskinan di Provinsi Jambi

. This study aims to determine the effect of fiscal decentralization on poverty both partially and simultaneously. It examines factors influencing fiscal decentralization, namely Regional Original Income (PAD), balancing funds, and regional expenditures. The data used in this research are secondary data obtained from the official website of the Directorate General of Fiscal Balance or the Ministry of Finance (DJPK). Based on the discussion results, the conclusions drawn are: 1) There is no significant effect of Regional Original Income on poverty, as evidenced by the t-value of -5.721 < t-table 2.131. 2) There is no significant effect of balancing funds on poverty in Jambi Province, as evidenced by the t-value of 1.399 < t-table 2.131. 3) There is a significant effect of regional expenditures on poverty in Jambi Province, as evidenced by the t-value of 6.22 > t-table 2.131. In conclusion, Regional Original Income and balancing funds do not have a significant effect on poverty, while regional expenditures have a significant effect on poverty in Jambi Province.

Does carbon reduction and sequestration conflict with food security in rural China?—What, why and how?

Based on panel data of 31 provinces in rural China from 1997 to 2020, this manuscript first applies a carbon reduction and sequestration (CRS) model from the perspective of agricultural carbon emissions and agricultural carbon sinks. We then construct a food security evaluation system to examine the four dimensions of quantity, quality, ecological and economic security. Finally, the study uses a spatial Durbin model to empirically analyze the impact of CRS on food security and the moderating effect of fiscal decentralization. The relevant results: First, from 1997 to 2020, carbon emissions rose from 221.9794 million tons (1997) to 251.1368 million tons (2020), representing an increase of 13.14 %. The total amount of carbon sinks increased from 518.259 million tons (1997) to 758.887 million tons (2020); an increase of 46.43 %. CRS exhibited a fluctuating downward trend, falling from 0.98 (1997) to 0.90 (2020). However, food security showed an increasing trend, rising 0.12 (1997) to 0.32 (2020), with an average annual growth rate of 6.94 %. Second, in the short term, national CRS has had a significantly negative impact on food security, whereas the long term the result is exactly the opposite. In terms of control variables, planting structure, openness to the world, and economic development have significantly positive impact on food security, and urbanization, technological progress, and environmental regulation have significantly negative impact on food security. Regional heterogeneity is evident in the three functional attribute areas. Third, fiscal decentralization can enhance the negative impact of CRS on food security in the short term and weaken the positive impact of CRS on food security in the long term. Similarly, some regional heterogeneity is found among different regions.

Does fiscal decentralization improve people's access to health and education services in Cameroon?

AbstractWe study the effects of fiscal decentralization on people's access to health and education services in Cameroon. It is generally believed that fiscal decentralization is an essential way to improve people's access to social services such as education and health. After reviewing the literature, we employed the Driscoll and Kraay estimate in a sample of 45 rural and urban municipalities for the period 2010–2020 to find our results. The results show that fiscal decentralization has a positive effect on the number of classrooms per pupil and the number of desks per pupil. At the same time, it negatively affects public hospitals per capita and the state of public hospitals. To improve people's access to education and health services in Cameroon, it is necessary to encourage the transfer of powers to municipalities. There is a need to control the actions of local officials to avoid mismanagement of resources that will not benefit the population. Also, the responsibility for selecting communal projects financed via the public investment budget within the framework of decentralization should be exclusively that of municipal executives, and not that of the central government.

IMPACT OF FISCAL DECENTRALIZATION ON THE ECONOMIC GROWTH OF KADUNA STATE.

The economic development of local governments in Nigeria faces several challenges, including revenue allocation, lack of autonomy, and constant interference by the State Government. There is a widespread belief that Fiscal Decentralization (FD) is the remedy to these challenges, and this study used panel data from 2006 to 2021 to examine the effect of fiscal decentralization on economic growth in the 23 local government areas of Kaduna state. Fiscal Decentralization between Kaduna state and each local government was measured using four indicators, namely, revenue indicator (RI), expenditure indicator (EI), autonomy indicator (AI) and capital indicator (CI). Except for the expenditure indicator, the study's findings indicate that all measures of fiscal decentralization are positively and significantly correlated with economic growth. Further findings revealed that a possible explanation for why the expenditure indicator is negatively related to economic growth is that Local Governments are often used as administrative spending units, where spending decisions reflect the state government’s policies regardless of the immediate needs of the local government area in question. Based on the findings of this research, it is recommended that Kaduna state government should promote true fiscal decentralization by assigning more fiscal responsibilities to Local governments in order to bring about faster economic growth in all regions of the state.

Achieving ecological sustainability in OECD countries: The role of fiscal decentralization and green energy

The global push for sustainable development has increased interest in understanding the complex interplay between various factors that affect the load capacity factor. The load capacity factor is a metric used to assess the utilization or capacity of a system or resource. It indicates how effectively the system or resource is used at any given time. This study aims to provide an understanding of the potential environmental effects of human activities by examining the effects of fiscal decentralization, renewable energy share, and natural resources on the load capacity factor in OECD countries from 1995 to 2020. The study's findings emphasize the need to promote renewable energy sources, optimize the utilization of natural resources, and empower local authorities in determining energy policy. Furthermore, findings reveal that fiscal decentralization can significantly affect the load capacity factor, particularly at higher levels of decentralization, and that as the level of fiscal decentralization increases, the load capacity factor continues to exert a significant influence. Moreover, economic growth negatively impacts the load capacity factor, indicating that higher levels of economic growth have a greater impact. A comprehensive and effective policy promoting sustainable development, enhancing load capacity, and mitigating environmental risks should be the focus of policymakers in the OECD countries. A greener and more sustainable future can be achieved by aligning fiscal decentralization, renewable energy promotion, and sustainable resource management.

Spatiotemporal impact of fiscal decentralization and economic growth: evidence at provincial level in Vietnam

ABSTRACT This study examines the spatiotemporal impact of fiscal decentralization on economic growth at the provincial level in Vietnam with data from 2010 to 2018. The results show a complex relationship where the direct, indirect, and total effects of fiscal decentralization on economic growth are positive in the short-term but negative in the long-term. Additionally, this study shows that the North tends to use fiscal decentralization resources for growth purposes more effectively than the South. These results confirm that it is necessary to take into account both similarities and differences in local contexts in estimating the impact of fiscal decentralization. Thereby, our results suggest that fiscal decentralization policy should focus on some key provinces/regions to achieve optimal growth before the diminishing effectiveness increases in the long-term.

Paradoxes of the Anti-crisis Role of Fiscal Federalism: Analytical Review of Studies

The analytical review of studies of the anti-crisis role of fiscal federalism during economic, ecological, epidemic challenges and territorial conflicts in 1950–2024 reveals four paradoxes. The first of them indicates the scientific validity of the positive anti-crisis effect of fiscal decentralization. But when crises arise in practice, decentralization turns out to be unclaimed, and preference is given to centralization. The second paradox is related to the nonlinear positive effect of fiscal decentralization on economic growth, natural resources consumption, and carbon emissions. For example, the nonlinear positive effect of decentralization is achieved when the institutional context is improved. The third paradox is the relatively weak methodological elaboration of fiscal federalism during pandemic challenges, although it had the greatest practical relevance compared to more in-depth econometric studies of economic and environmental challenges. The fourth paradox is that fiscal federalism can both resolve the territorial conflict and create the preconditions for its resumption in the future. The peacemaking conditions of fiscal federalism are transparency and stability of inter-budget transfers, as well as insured access of the conflict region to its natural resources.

Fiscal decentralization and economic growth: Empirical evidence from European countries

In this paper we empirically investigate the relationship between fiscal decentralization and economic growth in the European countries, using panel dataset for 31 European countries, over the period 1972-2012. Our empirical results indicate that fiscal decentralization, quantitatively measured as the ratio of local government expenditures and revenues in general government expenditures and revenues has a favorable impact on economic growth in the European countries and also that revenue decentralization is shown to be more effective than expenditure decentralization in terms of stimulating economic growth. Further, our empirical results also suggest that the relationship between decentralization and economic growth is nonlinear, i.e. there is a certain optimal level of fiscal decentralization in terms of economic growth. This means that fiscal decentralization is expected to have a more pronounced positive impact on growth in less decentralized countries, while in more decentralized countries, a further increase in decentralization starts to hinder economic growth. In addition, the growth-enhancing effect of fiscal decentralization is even strongly confirmed in our subsample of advanced European countries, when long termed effect of decentralization was examined. Therefore, compared with our previous findings on the impact of fiscal decentralization on growth in Central and Eastern European countries, we find that fiscal decentralization has a different impact on economic growth in advanced European countries vis-à-vis Central and Eastern European countries, i.e., while it enhances growth in the former, it hindered growth in the latter.

Analyzing Green Growth Efficiency in China and Investigating the Spatial Effects of Fiscal Decentralization: Case Study of Prefecture-Level Cities

Analyzing Green Growth Efficiency in China and Investigating the Spatial Effects of Fiscal Decentralization: Case Study of Prefecture-Level Cities

Fiscal decentralisation and the attenuating effects of inter‐governmental transfers and economic development on corruption in China

AbstractThe consensus in the literature is that fiscal decentralisation is a means to reduce corruption. For China, the attenuating effects of fiscal decentralisation are often enhanced by other factors. This paper argues that prior findings serve to facilitate the design of anti‐corruption measures but they do not address why individuals may engage in corruption. This is especially as individual evidence suggests that engaging in corruption is against professional ethos in China. This paper suggests that intergovernmental transfers and the relative level of economic development of where a public servant is serving influence the decision of whether to engage in corruption. Specifically, intergovernmental transfers and a higher level of local economic development directly affect the resources that a local administration has. In turn, this affects the extent to which one may realise their motivations for a career in the public sector. Empirical estimates for 1998–2013 serve to support the hypothesis.Points for practitioners Fiscal decentralisation mitigates the prevalence of corruption in China in conjunction with other complimentary factors. But engaging in corruption is inconsistent with motivations for a public sector career which include engaging in work for society's greater benefit. Corruption may emerge because public servants feel that they may be unable to achieve their aims for joining the public sector because of local resource constraints. Empirical findings suggest that increased resources to local administrations from intergovernmental transfers and economic development may discourage public servants from deviating from their stated career motivations, that is, engaging in corruption.

The Effect of Municipal Fiscal Decentralization on Subjective Well Being: The Case of Chile

This research hinges upon the relationship between fiscal decentralization and life satisfaction. It contributes to the field by performing an empirical analysis focused on the case of Chile, by merging the national household survey (CASEN) with municipal level information. This analysis is based on a hierarchical empirical model, in which data from both sources are integrated. Our results show a significant positive effect of municipal level fiscal decentralization on individual subjective well-being. Nonetheless, we also show that said result is contingent upon residents’ political representation, which is in line with the hypothesis that citizens’ oversight of local authorities is a necessary condition for the effect of fiscal decentralization to emerge. From the viewpoint of how fiscally decentralized measures should be implemented in practice, above evidence suggests that said process should be accompanied by the strengthening of local residents’ participation in community relevant matters. Further confirmation of this is presented in this research, by showing that residents’ membership in organized groups further increases individual subjective well-being. JEL Classification: H72, H77, C11.

Does Fiscal Decentralization Reduce Poverty? An insight from provincial level analysis in Pakistan

The present study has been designed to check the effect of fiscal decentralization (FD) on the poverty levels in Pakistan. Three measures of FD, namely intergovernmental transfers, provincial government revenues, and expenditure, are used in this study. Furthermore, the effect of FD is checked on the poverty levels separately in four provinces of Pakistan. Poverty levels are measured with the help of the Multidimensional Poverty Index (MPI) and the percentage of poor households with a value under 35 according to the International Wealth Index (IWI). This study has used panel data from 1990 to 2020 for the model in which poverty is measured through IWI value. Data from 2004 to 2020 has been used for the model in which poverty is measured through MPI. Feasible Generalized Least Square (FGLS) has been used to obtain the regression results by avoiding the problem of serial correlation and heteroscedasticity. The study's results highlighted that two measures, namely intergovernmental transfers and provincial government expenditures, have a nonlinear relationship with poverty. An increase in intergovernmental transfers and provincial government expenditures reduces poverty at a decreasing rate at first. Then, an increase in both variables results in the form of a higher level of poverty. Moreover, revenue decentralization at the provincial level increases poverty initially and reduces poverty after a critical point.

The Effect of Crises on Fiscal and Political Re-Centralization

Economic stability plays a crucial role in any fiscal and political decentralization process. In the face of financial and economic shocks, when revenues and expenditures are reduced, countries may decide to gather resources at the central level creating a re-centralization scenario or may take away devolved powers and centralize political institutions. Using data from 75 countries, we examine the effects of the economic crisis on fiscal and political decentralization. We find that several types of crises lead to fiscal re-centralization. However, in the case of domestic borrowing crises, the effect is further revenue decentralization, probably reflecting the central government's willingness to empower sub-national governments to avoid similar crises. In addition, we explore the impact of the economic crisis on political decentralization and find that they are concordant with the fiscal decentralization effects, suggesting an alignment of the impact along political and fiscal dimensions of subnational autonomy. We also explore whether the economic crises trigger more permanent rather than just transitory changes in the level of decentralization, and we generally find more long-lasting effects in the case of fiscal decentralization measured from the expenditure side. This pattern is apparent in the cases of inflation and banking crises and is less precise but still present in the cases of currency and external debt crises. The main results are robust to different specifications, estimation methods, and the measurement of decentralization.

What drives environmental sustainability? The role of renewable energy, green innovation, and political stability in OECD economies

ABSTRACT One possible way to achieve environmental sustainability is by addressing the issue of rising CO2 emissions, which significantly cause climate change by intensifying the greenhouse gas effect. The Organization for Economic Cooperation and Development (OECD), which substantially contributes to global CO2 emissions, necessitates a paradigm shift towards using clean energy sources and promoting green innovations to ensure environmental sustainability. Thus, this study aims to inspect the role of renewable energy use, green technology innovation, political stability, and fiscal decentralization in attaining environmental sustainability by limiting CO2 emissions for seven OECD economies from 2000 to 2019. This study has employed the ‘Cross-Sectional Augmented Autoregressive Distributed Lag and Augmented Mean Group Estimator’ for robust empirical analysis. The results indicate that renewable energy use, political stability, and fiscal decentralization can mitigate CO2 emissions and ensure environmental sustainability in OECD economies. In contrast, green technology innovation exhibits an insignificant effect on CO2 emissions. Furthermore, the moderation effects of fiscal decentralization and political stability exhibit a negative relationship with CO2 emissions. Notably, this study advises OECD nations to encourage regional cooperation to ensure political stability and devolution of fiscal powers to promote green innovation and renewable energy use to achieve sustainable goals.