Expenditure Assignments Research Articles

Fiscal Decentralisation and Economic Growth in Pakistan

Fiscal decentralisation is seen as a means to enhance the economic efficiency of the government and also promote economic growth. Fiscal decentralisation is the empowerment of fiscal responsibilities to the sub-national governments, involving devolution of powers to tax and spend along with arrangements for correcting the imbalances between resources and obligations. The effectiveness of fiscal decentralisation depends upon: (a) appropriate expenditure assignments—with division of functions among different levels of government depending upon their comparative advantage (called the principle of subsidiarity); (b) appropriate tax or revenue assignments; and (c) the efficient design of a system of transfers and its proper implementation [Kardar (2006)].

Effects of public expenditure assignment by regions in Kazakhstan to reduce infant and child mortality

Effects of public expenditure assignment by regions in Kazakhstan to reduce infant and child mortality

Perspectives in Fiscal Decentralization: Challenges and the Unfinished Agenda

Fiscal decentralization has received a great deal of academic research attention in the past three decades. Much of this work has been directed toward advising countries on how they should structure their intergovernmental fiscal systems to move government decision making closer to local constituencies. Yet even with all this good work, there are many areas where major questions remain. This paper is about where the next round of research might be focused. It begins with an explanation of why attempts to measure fiscal decentralization are unsatisfactory, and ends with a discussion of what might be done about the equally unsatisfactory state of availability of comparative data. The more detailed discussions in this paper cover tax and expenditure assignments, intergovernmental transfers, debt, and the controversy about whether fiscal decentralization has worked.

The impact of decentralisation on the performance of health care systems: a non-linear relationship.

This paper examines the role of institutions—notably the degree of administrative decentralisation across levels of government—in health care decision-making and health spending as well as life expectancy. The empirical analysis builds on a new methodology to analyse health sector performance. In particular, the present analysis examines the impact of centralisation versus decentralisation of responsibilities across levels of government, making use of newly collected data on governance and expenditure assignment, as well as non-linear empirical specifications. An interlocking U-shaped relationship is found with respect to expenditure and life expectancy. Under moderate decentralisation, public spending in health care is lower, while life expectancy is higher, compared with more centralised systems; however, in highly decentralised systems, public spending is higher and life expectancy is lower. This finding of a “fish-shaped” relationship for decentralisation and outcomes also helps to understand recent reforms of OECD health systems, which have often reverted towards more moderate degrees of administrative decentralisation.Supplementary InformationThe online version contains supplementary material available at 10.1007/s10198-021-01390-1.

The Practices and Challenges of Fiscal Decentralization: A Case of Bedelle Woreda, Oromia Region, Ethiopia

The study's main objective was assessing the practices and challenges of fiscal decentralization at Bedelle woreda, with particular reference to basic selected sectors (Education, Agriculture, Health, Water, and Road). According to the nature of this study, a descriptive research design with qualitative and quantitative methods was adopted. The population of the study was government employees working in selected sectors of Bedelle Woreda. The census sampling technique was used in this research because the study population was manageable. To this effect, 128 participants were selected using a census sampling size. Besides this, Woreda (District) Finance and Economic Development and Woreda Revenue Office Authority officials were purposely selected to conduct interviews. The data-gathering instruments were questionnaires, key informant interviews, and document analyses. Descriptive and inferential statistical techniques were used for data analysis. In descriptive using frequencies and percentages and inferential statistics, multiple linear regression was used to assess relationships between the independent variables (legal framework, revenue, expenditure, employee experience, employee training, management commitment, and fiscal transfers) and the dependent variable (fiscal decentralization). The findings show that internal revenue raising and utilization in the selected sectors was very low. Besides, lack of autonomy in expenditure decisions of sectors, insufficient capacity building, the extent of fiscal transfer, and financial resource were the major challenges in the study area. Overall, the regression analysis revealed that, Revenue raising (β = -0.164, p<0.05), Expenditure decision (β = 0.236, p<0.05), Employee experience (β = 0.525, p<0.05), and Commitment of management (β = 0.172, p<0.05), all have statistically significant and positive effect on fiscal decentralization. Based on the study's findings, it is recommended that existing legal frameworks be modified to enable the sectors to use their budget in line with their action plan to generate and utilize sufficient revenues. Special emphasis should be given to an employee's capacity building, independence of planning and budgeting, and clear autonomy of expenditure assignments. Inter-governmental fiscal relations should also be planned to reduce the horizontal imbalances observed at selected sectors of the woreda under study.

Who absorbs the shock? An analysis of the fiscal impact of the COVID-19 crisis on different levels of government

This paper discusses the fiscal impact of the COVID-19 crisis across levels of government. It contrasts the composition of revenues and expenditures of different levels of government and their main institutional differences. For revenues, an error correction model is used to estimate the short-term elasticities of different levels of government, showing that subnational governments’ (SNGs) revenues are less sensitive to economic downturns than central governments’, mostly because SNGs tend to rely more on recurrent taxes on immovable property. For expenditures, central governments are often responsible for the bulk of expenditure on social protection, while SNGs have a higher investment-to-revenue ratio. The combination of these differences of expenditure assignment with the substantial budget and borrowing constraints that SNGs face creates a tendency towards pro-cyclicality at the subnational level and counter-cyclicality at the central level. Furthermore, in the context of the COVID-19 crisis, in order for SNGs to have the fiscal capacity for necessary measures to tackle the outbreak, central governments supported SNGs mostly through intergovernmental grants. As a consequence, central governments have absorbed most of the shock.Supplementary InformationThe online version contains supplementary material available at 10.1007/s10368-021-00518-1.

DOES FISCAL DECENTRALIZATION AFFECT ON THE CONVERGENCE OF PER CAPITA INCOME IN INDONESIA?

Nearly two decades since 2001 Indonesia has implemented a decentralized system. The basis of decentralization implemented in Indonesia is at the regency/municipality level while fiscal decentralization is carried out fully in the area of expenditure. It is important to know whether the implementation of fiscal decentralization has an effect on national development. One indicator to determine the impact of fiscal decentralization on development is whether there is economic convergence between regions during the period of regional autonomy. Using panel data of 411 regencies and 94 municipalities in Indonesia during the implementation period of decentralization from 2001-2017, this study aims to examine indications of economic convergence between regions in Indonesia. This study uses indicators of fiscal decentralization in terms of expenditure assignment, namely regional spending on education, health, and infrastructure. Based on the test results of both static convergence and dynamic convergence testing, it was found that there was a convergence of per capita income between regency/municipality in Indonesia.

Impact of Fiscal Decentralization on Local Autonomy in the Sudan: Experience of Gadarif State

Based on state data of the periods (1997-2012), this study aimed at evaluating the fiscal decentralization experience of Gadarif state of eastern Sudan in the context of different aspects of fiscal decentralization, namely expenditure assignment, revenue assignment and intergovernmental transfers. To accomplish these objectives, many local fiscal indicators have been calculated, and parameters of regressions of both revenues and expenditures have been estimated. The results reveal that the experience of fiscal decentralization of the state came out with poor fiscal situations indicated by higher dependence on the federal transfers and higher vertical imbalance and consequently the failure of the state government to perform its responsibilities of delivering the basic services to its constituents. Moreover, none of both local expenditure neither local revenues respond to federal transfers, indicating the failure of these

Impact of Intergovernmental Fiscal Transfers on Gender Equality in India: An Empirical Analysis

Intergovernmental fiscal transfers (IGFT) are, in theory, neither good nor bad for tackling gender inequalities. Fiscal federalism with asymmetry in revenue and expenditure assignments inevitably leads to vertical and horizontal imbalances in public service provisioning. Because the states of India have different capacities for raising taxes and for funding public expenditure, intergovernmental transfers can play a role in equalization of fiscal capacities. Do higher per capita fiscal transfers help in reducing gender inequalities across states in India? Using data from the Finance Accounts of various states, we analyse the impact of fiscal transfers – both conditional and unconditional fiscal transfers – on the gender parity index in education, using panel data models. We find that unconditional transfers have a significant and positive impact on gender parity outcomes in the education sector at the primary and secondary levels, in contrast to tied transfers. The models also control for gender budgeting initiatives across states and find that gender budgeting has a beneficial effect on education equality. The policy implication of these results for the recently constituted Fifteenth Finance Commission in India is to strengthen the “gender equality” criteria in intergovernmental transfers in India.

Designing Sound Fiscal Relations Across Government Levels in Decentralized Countries

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.

Designing Sound Fiscal Relations Across Government Levels in Decentralized Countries

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.

Designing Sound Fiscal Relations Across Government Levels in Decentralized Countries

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.

Federal finance: what can South Sudan and somalia learn from their neighbor Ethiopia?

The paper examines the Ethiopian experience with fiscal federalism which can be used as a lesson by South Sudan and Somalia, the two countries which are struggling to have a stable and viable nation. Ethiopia adopted federal system in 1995 which creates nine states based on ethnic grounds. Of the nine states, six of them have single ethnic group representing more than 80 percent of state’s population while remaining three are multi-ethnic states. The fiscal relationships between the federal and state governments are provided in the Constitution addressing the four major components of federal finance. The expenditure assignments among tiers of government appears to be in line with the general principles while taxing power is over concentrated in the hands of federal government which resulted in high level of vertical fiscal imbalance. To correct this imbalance the federal government makes transfers to state governments in the form of formula-based budget subsidy which covers much of their budget. While political forces known to influence division of powers in federal structure, the existing federal finance arrangement in Ethiopia does not face serious challenges. The country, both at federal and state levels, has been ruled by the same political party since the adoption of the federal constitution. The existing fiscal arrangement may face challenge if another political party takes power in some states or the federal government. Keywords: Federalism, Finance, South Sudan, Somalia, Ethiopia

Монгол улсад төвлөрлийг сааруулах асуудал

No Mongolian AbstractIn general decentralization is connected with the transfer of responsibilities for planning, management, resource raising and allocation from the central government to the lower levels of government. In particular fiscal decentralization means that local authorities become responsible for the expenditure and revenue assignment. From the economic and political science perspectives fiscal decentralization will improve resource allocation and accountability, which results in an efficient and effective supply of public goods and support private markets.In last decade Mongolia has introduced a number of decentralization measures, which followed a top dawn approach and were slowly implemented without any integrated decentralization strategy. Currently Mongolia is a de-concentrated state with fiscal centralization. The local governments are still far away from having the political, administrative and fiscal autonomy to manage their own affairs.

Education Funding and Human Capital Development in Nigeria

The paper establishes how the Nigeria fiscal federalism impact education funding and human capital development indicators, and provides long-time policy proposal to raise long-run economic growth through fiscal federalism. Economic theories that link government income, expenditure, human capital and economic development exist. Important is the relationship between tiers of government in terms of revenue – sharing and expenditure for economic development. Recommendations put forward are, the need to review the expenditure assignments as well as the fiscal jurisdiction of the three tiers of government. Each unit must justify whatever it is getting from the national purse.

The Potential Influence of Researchers’ “Hidden” Procedure Decisions on Estimates of Visitor Spending and Economic Impact

The potential influence of eight decisions made by researchers that are unlikely to be reported in economic impact analyses are identified and empirically tested. The data set was comprised of studies undertaken at nine state parks in Texas. Four of the decisions were categorized as being potentially relatively malignant in that they used obviously inappropriate procedures and were likely to substantially exaggerate expenditure estimates: using group weighting rather than individual weighting; omitting a measure of the extent to which visiting a park was the primary trip purpose; retaining outlier values; and aggregating different visitor segments. The four relatively benign decisions were: convenience or probability samples; managers’ or samples’ estimates of number of nonlocal visitors; treating nonresponses as missing data or as zero expenditures; and sector selection for assignment of government expenditures.

Fiscal Federalism in Russia through the Lens of Government Programs Implementation

В последние 20 лет были разработаны и приняты многочисленные правительственные программы и концепции в сфере управления общественными финансами. Цель настоящего исследования определить, насколько реализация данных документов способствует или препятствует развитию бюджетного федерализма, а предмет исследования соответствие формально заявленных в них целей и задач реальному состоянию дел в бюджетной сфере. В основу методологии данной статьи положен дескриптивный статистический анализ основных параметров бюджетной системы, а также сопоставление проблем, задач и результатов выполнения правительственных программ и концепций. В исследовании определены основные тренды в развитии межбюджетных отношений на современном этапе, выявлены противоречия в формулировках целей и задач правительственных документов, проведен содержательный анализ индикаторов, впервые появившихся в Государственной программе 2014 года. Ключевые слова: бюджетный федерализм, бюджетная система, правительственные программы, целевые индикаторы.

The Impact of Fiscal Decentralization on Local Economic Growth. The Case of Romania

The paper looks into the fiscal decentralization developments that took place recently in Romania, focusing on the local economic benefits. Similar to previous studies, the analysis uses an econometric growth model that tests the relationship between fiscal decentralization and local economic growth in the Romanian counties between 2000-2015. Results suggest that the current fiscal decentralization system is not growth-enhancing as there seems to be a wrong assignment of expenditures and revenues between the central and the local governments. Nonetheless, an increase of the local fiscal autonomy might reverse the negative relationship and lead to significant local economic growth.

Frozen in Time: The Much Needed Reform of Expenditures Assignments in China

China has been carrying out significant fiscal reforms on intergovernmental fiscal relations for over three decades. However, these reforms have largely concentrated on the revenue side of the budget, and generally have not been coordinated with an explicit strategy for the reform of functional expenditure assignments. Currently, there is large consensus that the weaknesses with the current assignment of expenditure responsibilities have become one of the most serious obstructions -- if not the most serious -- to the further improvement of China fiscal system. In this paper, we provide a comprehensive review of the actual practice with expenditure assignment among different levels of government in China over the past decades. We highlight the most important issues surrounding the current system qualitatively and quantitatively, and provide a road map and practical recommendations for its future reform.

Frozen in Time: The Much Needed Reform of Expenditures Assignments in China

China has been carrying out significant fiscal reforms on intergovernmental fiscal relations for over three decades. However, these reforms have largely concentrated on the revenue side of the budget, and generally have not been coordinated with an explicit strategy for the reform of functional expenditure assignments. Currently, there is large consensus that the weaknesses with the current assignment of expenditure responsibilities have become one of the most serious obstructions—if not the most serious—to the further improvement of China fiscal system. In this paper, we provide a comprehensive review of the actual practice with expenditure assignment among different levels of government in China over the past decades. We highlight the most important issues surrounding the current system qualitatively and quantitatively, and provide a road map and practical recommendations for its future reform.