Fiscal Decentralization Research Articles

Fiscal Decentralization and access to Social Services in Pakistan: Exploring the Role of Corruption

The present study looks at how accessibility to water and sanitation (social services) are affected by fiscal decentralization during the years 1980–2020 by incorporating the role of corruption in Pakistan using an ARDL Bounds testing approach. Two indicators, including revenue and expenditure decentralization, are employed to precisely capture the essence of fiscal decentralization. The Corruption Perception Index is used to quantify corruption. The empirical results indicate that decentralization of revenue and expenditures has a growing impact on social service access. The study offers proof that corruption not only impairs access to social services but also lessens the benefits of fiscal decentralization on that access. To achieve the desired effects of fiscal decentralization, the policy framework needs to take particular actions, such as increasing accountability and transparency to reduce corruption and enhance the quality of institutions.

Can heterogeneous environmental regulations improve industrial green total factor energy efficiency?

Whether heterogeneous environmental regulations in China can improve industrial green total factor energy efficiency (IGTFEE) is essential to sustainable industrial development nationwide. However, under China's fiscal decentralization system, the impact of heterogeneous environmental regulations on the IGTFEE and its underlying mechanism needs further exploration. This study incorporates capital misallocation and local government competition into the research framework and systematically investigates the mechanisms and effects of environmental regulations affecting the IGTFEE under China's fiscal decentralization system. Based on provincial panel data from 2007 to 2020, this study measured the IGTFEE using the Super-SBM model with undesirable outputs. Based on efficiency, this study uses a bidirectional fixed-effects model, an intermediary effect model, and a spatial Durbin model for empirical testing. The results show that the effect of command-and-control environmental regulation on the IGTFEE presents an inverted U shape, while the effect of market-incentive environmental regulation on the IGTFEE presents a U shape. Conversely, the effect of command-and-control environmental regulation on capital misallocation presents a U shape, while the effect of market-incentive environmental regulation on capital misallocation presents an inverted U shape. Capital misallocation is the mediating variable of heterogeneous environmental regulations affecting IGTFEE, but heterogeneous environmental regulations do not affect the IGTFEE through the same mechanisms. The spatial spillover effects of command-and-control and market-incentive environmental regulations on IGTFEE present a U shape. Local governments adopt a differentiation strategy for command-and-control environmental regulation and a simulation strategy for market-incentive environmental regulation. Environmental regulations have spillover effects on the IGTFEE under different competitive strategies, but only the imitation strategy, characterized by the race-to-the-top, can promote local and neighboring IGTFEE. Therefore, we propose the following recommendations: the central government should flexibly adjust the intensity of environmental regulations to maximize the capital allocation effect, set diversified performance assessment indicators to motivate local governments into the healthy competition and reform the modern fiscal system to correct distortions in the behavior of local governments.

Discussion on the design of compensation standards for regional environmental pollution from the perspective of new structural economics

How to effectively protect the ecological environment while socio-economic development, to achieve the harmonious and sustainable development of human society and the natural ecological environment, has been paid more and more attention by governments and academic circles around the world. Therefore, the design of compensation standards for regional environmental pollution is proposed from the perspective of new structural economics. Based on the perspective of new structural economics, this paper provides a new explanation of the impact of fiscal decentralization on environmental pollution, according to the economic and technical indicators related to ecological environmental pollution, with the help of the subjective and objective empowerment method combined with the analysis of hierarchy method and entropy method, the weight of each ecological environment pollution evaluation index in the evaluation and division of ecological environmental pollution level is studied, and the comprehensive evaluation method is used to construct the ecological environment pollution technology rating evaluation model, and the compensation value of regional environmental pollution is finally obtained by combining the panel regression model. The method of this paper has wide applicability and significant advantages. The experimental results show that the COD emission of the North Water Source Area (QZ) of the Qingzhang River is 208t/a, and the upstream of the drinking water source area needs to compensate 3.88 million yuan downstream for water quality and water ecological restoration.

A Study on the Effect of Precious Commodity Prices and Macroeconomic Fluctuations on Cryptocurrency Trading in India

The role of currency in the functioning of the global economy is undeniably of utmost importance to people and governments, whose trust in monetary authorities is the sole provider of value to most of the world’s money which is in the form of fiat currencies. An alternative means of value exchange called cryptocurrencies operating entirely through the internet has the potential to dilute public trust in fiat currencies due to many advantages including fiscal decentralization among others. This study examines the relationship between key macroeconomic variables namely bond prices, dollar exchange rates and the price of gold and its derivatives and cryptocurrency trading in the Indian context. The daily frequency data is collected after the Indian Supreme Court’s judgement in March 2020 which overturned a ban on cryptocurrencies which was imposed before it. We aggregated the data using Principal Component Analysis and examined the short-run and long-run relationship between the variables and cryptocurrency trading using Toda Yamamoto Granger Causality Tests and ARDL Error Correction Model. The results reveal valuable insights about public perception of cryptocurrencies either as an investment asset or as a medium of exchange by examining the significance of individual independent variables in both the long and short run.

Impact of Fiscal Decentralization on Buoyancy of Services Tax in Khyber Pakhtunkhwa

The present research investigates the impact of fiscal decentralization on services tax buoyancy in province Khyber Pakhtunkhwa covering time series data from 2001 to 2021. Chow Break Point test for detecting structural break was applied and found structural break in the year 2014 which coincided with the year of devolution. The break in the data was taken care by Binary Dummy variable as an intervention and interaction terms in the model. The results of segmented intervention model illustrated that the estimated tax buoyancy have positive and more than unitary effects during post-tax devolution period. While, the services tax was non-buoyant, at the time FBR was collecting the said tax. However, despite having buoyant tax, KPRA due to complexities in post devolved tax system have missed its revenue targets and was unable to explore services sector up to optimum potential. Based on the findings, the study recommends broadening of tax base, documentation to bring more taxpayers in the tax net and enhancement in tax administration to achieve revenue targets and explore un-tax services tax in the province.

Challenges in Assessment of Health Systems Decentralization: The Role of Path Dependence and Choice of Indicators Comment on "The Effects of Health Sector Fiscal Decentralisation on Availability, Accessibility, and Utilisation of Healthcare Services: A Panel Data Analysis".

Optimal resource allocation within national health systems represents the ultimate challenge in diverse countries worldwide. Major part of the literature points that health systems decentralization potentially address the challenge. The present commentary focuses on the debate referring to effects of health systems decentralization, based on the evidence of the study of Arianna Rotulo and colleagues. Studies on the subject emphasize the role of path dependence and the influence of choice of indicators for measurement of effects in the assessment of health systems decentralization. Acknowledging the complexity of the phenomena, the results of the study of Rotulo et al on health system decentralization in Italy are highlighted through the analysis of recent evidence from the literature. The present commentary shows that there are diverse indicators adopted in the literature on the subject, pointing to mixed results, depending on country characteristics and selection of indicators in the analysis. The synthesis of indicators gathered in recent studies also indicate that health system indicators are sensitive to path dependence, thus, requiring additional attention to assumptions of studies on health systems decentralization. Thus, studies should consider the influence of path dependence on organizational practices and institutional structures involved in decentralization processes, in addition to acknowledging that assessments on decentralization vary substantially according to indicators adopted in the analysis, and their links with previous decisions within health systems.

Fiscal decentralisation and technological innovation efficiency in China: an efficiency decomposition perspective

ABSTRACT An effective evaluation of the factors affecting technological innovation efficiency (TIE) at the system level is an important focus in promoting high-quality economic development. Previous studies are extensively concerned with the relationship between fiscal decentralisation and TIE in recent years, but little attention has been paid to whether and how fiscal decentralisation affects TIE systematically from the perspective of efficiency decomposition. Using China’s panel data at the province level from 1998 to 2018, we explore this question by decomposing the TIE into scale efficiency and pure technical efficiency. Findings demonstrate that fiscal decentralisation has a positive and significant influence on TIE and scale efficiency, but has no significant influence on pure technical efficiency. The influences of fiscal decentralisation on TIE and its decomposition efficiency have evident regional heterogeneity. Fiscal decentralisation can improve TIE and scale efficiency by increasing fiscal expenditure on science and technology. These findings may aid policymakers in reasonably designing future innovation policies and the next-stage reform package.

Centralization, Elite Capture, and Service Provision: Evidence From Taiwan

Much recent work has debated the effect of decentralization on service provision, its underlying mechanisms, and the tradeoff between responsiveness and elite capture. This study contributes to that debate by investigating a rare partial rollout of institutional change that reversed administrative, fiscal, and political decentralization in Taiwan. Utilizing a difference-in-differences design, I find that centralization decreases public goods provision and that such a negative effect is stronger and more robust on those public goods that involve greater local government activity. Additional evidence related to mechanisms suggests that the loss of proximity and accountability in service delivery after centralization can be critical. The effect heterogeneity results do not constitute strong evidence that centralization significantly improves service provision in areas with higher levels of local elite capture. These findings highlight the importance of decentralization’s responsiveness advantages in improving local service provision and advance the policy debate on local institutional choice.

Economic Governance of Cannabis: The Implications of Polycentric Governance in Mendocino County

The 2016 passage of California’s Proposition 64, legalizing recreational (adult-use) cannabis, was justified ex ante in part for its potential to encourage restorative justice and positive local and state economic outcomes. But are the local institutions administering Proposition 64 achieving these aims? We address this question via a two-year case study of Mendocino County’s polycentric cannabis governance system using a mixed methods approach including archival analysis, cannabis industry and governance system interviews, and participant observation. Evidence from our case study suggests that Mendocino’s ability to achieve these goals is hampered by three quasi-market failures: interjurisdictional conflict, coproduction deficits, and devolution without adequate fiscal decentralization. A major driver in these quasi-market failures is the substantial regulatory and enforcement responsibility this governance system places on local government. We conclude by discussing some institutional structures that may address these failures.

Analysis of the Impact of Fiscal Decentralization Policies on Indonesia's Economic Growth During the Covid-19 Pandemic

The Covid-19 pandemic has put pressure on the global economy and Indonesia. The impact of Covid-19 is the largest since the 2008 Global Financial Crisis. This study aims to describe the fiscal policies pursued by the Indonesian government in response to the crisis during the pandemic, as well as to examine the influence of balancing funds and capital expenditures on local own-source revenues and their impact on the economic growth rate in 34 provinces in Indonesia. The results of this study showed Indonesian government's success in implementing a flexible fiscal policy with various fiscal stimulus has had a positive impact on the handling of the Covid-19 pandemic in Indonesia both from a health and economic perspective. Based on the results of the path analysis, the balancing funds and local own-source revenue variables have a significant influence on the economic growth rate, while the capital expenditure variable does not have a significant influence on the economic growth rate.

Institutional quality as the driver of fiscal decentralization in developing countries

Institutional quality as the driver of fiscal decentralization in developing countries

Towards climate action and UN sustainable development goals in BRICS economies: do export diversification, fiscal decentralisation and environmental innovation matter?

ABSTRACTSeveral nations across the world place a high focus on achieving carbon reduction objectives. Climate change is the most catastrophic result of human activity. Eco-innovation, export diversification, and fiscal decentralization are all viable approaches for resolving environmental concerns and achieving environmental sustainability goals. These tactics could help countries and levels of government pursue what they consider to be sustainable development. This research assesses the combined impact of export diversification, green technical innovation, and fiscal decentralization in order to accomplish the environmental sustainability goals of the BRICS countries from 1970 to 2020. The long-run dynamic equilibrium between the chosen variables is explored using the augmented mean group (AMG) approach. The results show that while the use of green technology and renewable energy improves the environment, ecological harm is aggravated by export diversification, fiscal decentralization, and economic growth. The BRICS nations should exercise caution while implementing export diversification and fiscal decentralization programs.

Analisa Fiskal di Provinsi Jawa Barat Periode 2019-2021

ABSTRACT
 The requirement to implement regional autonomy and fiscal decentralization is a good regional fiscal health condition. This study took a sample of districts / cities in West Java Province in the period 2019 - 2021 to be analyzed using the Fiscal Health Index. The research method uses a quantitative descriptive study and as the unit of analysis sets all districts / cities. The fiscal health condition of each Regency / City in the West Java Province region before and during the Covid-19 pandemic can be described through the results of the analysis. From the measurement of each indicator, it can be seen that the regions with good financial health conditions are Pangandaran Regency, Majalengka Regency, Cirebon City, and Banjar City. The financial condition of Pangandaran Regency is relatively stable, even though the two years of the Covid-19 pandemic have not experienced significant shocks. Likewise with Majalengka Regency, although the index fell at the beginning of the pandemic (2019, and 2020), in 2021 the index increased significantly. On the other hand, the financial health conditions that are classified as poor are Cianjur, Karawang, and West Bandung. These three regions have a financial condition index far from other regions. In 2019, West Bandung Regency and in 2021 Cianjur Regency are the regions with the lowest index while in 2020 the lowest is Karawang Regency. 
 Keywords: Regional Fiscal Health, Fiscal Decentralization, Financial Independence, Financial Flexibility, Service Solvency

The grease of the wheel: The correlation between corruption, regional revenue and expenditure in Indonesia

Previous research has revealed that corruption is considered to have two types of effects on the economy. Corruption is seen as an obstacle to the economy but also as a "grease of the wheel" that accelerates the rotation of economic cogs. This study aims to determine the position of corruption in Indonesia after fiscal decentralization. The study was conducted based on secondary data obtained from the publications of the Central Statistics Agency and the Corruption Eradication Commission. The test was carried out using correlation analysis from 2006-2020 to see the effect of corruption in the regions and private sector on its economic dimension. Results show that corruption in the regions has a significant positive effect on corruption in the private sector and the realisation of regional revenue and expenditure. These results support the argument that in Indonesia, the phenomenon of corruption as a grease of the wheel still occurs.

How fiscal decentralization and trade diversification influence sustainable development: Moderating role of resources dependency

After ratifying the Paris Climate Agreement (PCA), most advanced economies are contributing incessantly to the international climate change framework. However, their “Intended Nationally Determined Contributions (INDC) pledges are still far from achieved due to their high consumption of natural resources, which spurs economic activities and environmental impairments. Therefore, to coup this predicament, this study evaluates the influence of natural resource rent (NTR), fiscal decentralization (FSD), and trade diversification (TDF) on the sustainable development of G-7 countries from 1995 to 2020. The ecological footprint is used as the proxy to accurately represents environmental sustainability. The direction and magnitude of the asymmetric association of the nexus between FSD, NTR, TDF, and EFP have been evaluated with the quantile-based econometrics approach of “Method of the Moments Quantile Regression” (MMQR). The estimates of MMQR suggested that fiscal decentralization and trade diversification have negative and significant coefficients at all quantiles (Q0.25- Q0.90), which implies that these variables are the plausible solution to reducing ecological footprint by sharing the fiscal power with the local or subnational governments and excluding the specialized products from the trade basket. In contrast, NTR and GDP are positively and significantly associated across all quantiles (Q0.25- Q0.90), indicating the adverse impact of these variables due to the escalation of resource consumption and GHG emissions. Additionally, for the robustness of the MMQR estimates, the “Augmented Mean Group” (AMG) and “Common Correlated Effect Mean Group” (CCEMG) confirm a similar direction of association between variables. The results provide policy recommendations to enhance environmental sustainability through FSD and TDF.

Fiscal decentralization and economic growth: evidence from Brazilian states

Fiscal decentralization and economic growth: evidence from Brazilian states

The role of fiscal decentralization and technological innovations in curbing sulfur dioxide emissions: formulating SDGs policies for China

The role of fiscal decentralization and technological innovations in curbing sulfur dioxide emissions: formulating SDGs policies for China

Analisis Desentralisasi Fiskal Pada Postur APBD Kota Batam, Provinsi Kepulauan Riau Tahun 2018

This study focuses on a simple analysis of the public financial posture in Batam City. Fiscal decentralization in Indonesia is carried out by granting broad regional expenditure discretion supported by transfer funding from the center and strengthening local taxing power. Fiscal decentralization is expected to increase the efficiency and effectiveness of governance and public services in the regions. This is due to the proximity of the levels of government providing services to the communities they serve so that local governments understand their local needs and priorities. Furthermore, improving the quality of governance will encourage better access to public services and ultimately boost the regional economy and improve people's welfare.

Exploring the asymmetric effect of fiscal decentralization on economic growth and environmental quality: evidence from India.

In recent years, environmental issues have become controversial, and policymakers are discovering new predictors of carbon emissions. Some economists/researchers have advocated for fiscal decentralization to improve the quality of the environment by offering more financial authority to provincial/local and sub-national governments. Therefore, this work aims to inspect the effect of fiscal decentralization on economic growth and environmental quality in India by taking data from 1996 to 2021. This work applies both ARDL and NARDL econometric models for empirical examination. The findings of this study suggest that expenditure decentralization has asymmetric long-term and short-term consequences on economic growth, and carbon emission in India. The result of the asymmetric ARDL model also indicates that positive and negative shock in expenditure decentralization contrarily affects economic growth and carbon emission. Moreover, the positive and negative shock in revenue decentralization helps in reducing carbon emissions both in the long run and short run in India. These outcomes are useful for policy analysis from the Indian economic policy perspective. The study also laid out potential outcomes that may benefit India's local governments and central government in resolving the issues of economic growth and environmental degradation.

Does industrial structure changes matter in renewable energy development? Mediating role of green finance development

Green financing development mediated the interaction between industrial structure changes and renewable energy growth in China from 2000 to 2021. The research examines whether green financing may boost renewable energy development via industrial structural modifications. The research uses an econometric models to explore how green funding affects industrial structural changes and renewable energy development. Industrial structural changes boost renewable energy growth in China. Green finance development mediates the relationship between industrial structure changes and renewable energy development, suggesting that green finance can enhance the positive effect of industrial structure changes on renewable energy development. The research also reveals that green funding has a more significant long-term impact on renewable energy development. Industrial structural changes have a more significant impact on renewable energy development in economically developed areas. The results are significant for developing country policymakers promoting sustainable energy development via trade and fiscal decentralization.