Intergovernmental Fiscal Relations Research Articles

Rural Taxation Reforms and Compulsory Education Finance in China

In recent decades, the responsibility for the financing of compulsory education in rural China has rested with townships and villages which, with limited tax authority and uneven revenue capacity, increasingly relied on a plethora of arbitrarily imposed fees for funding. To reduce farmers‘ fiscal burdens, since 2000 the central government has installed a series of rural taxation reforms. Correspondingly, the central government shifted the administrative responsibilities of rural compulsory education to the county level in 2001, and implemented a series of policies to make up for the loss of revenues to education. Using a provincial-level dataset from 1998 to 2006, this study examines whether and how the rural taxation reforms have affected the adequacy and equality of compulsory education finance in China, and addresses related theoretical and policy implications from the perspective of intergovernmental fiscal relations.

DEVELOPMENT OF INTERGOVERNMENTAL FISCAL RELATIONS IN A REGION: THEORY AND PRACTICE ISSUES

The paper deals with the issues related to establishment of intergovernmental fiscal relations in Constituent Entities of the Russian Federation. Particular consideration is given to theoretical issues referred to: fi nance centralization criteria; principles of authority and resource allocation according to territorial levels; effi ciency of budget adjustment policy and individual approach to territories. The author has made close analysis of intergovernmental fiscal relations in municipal entities of the Perm region; as a result, principal issues related to development of the given entities have been set forth. The ways to enhance intra-regional and inter-budget relations in the Russian Federation have been suggested.

Unterschiede regionaler Wirtschaftskraft – welchen Einfluss hat die Landespolitik?

Different regional economic theories come to different conclusions with regard to the impact of (state) policies on the economic prosperity of regions. This article provides empirical evidence, that determinants like geography, urbanization, industrial mix and social capital explain 71 percent of the variation in GDP per worker among West German regions. All these factors have in common that they cannot, at least in the short run, be influenced by state policies. Determinants like infrastructure and human capital that could be influenced by state policies only explain another 8 percent. These empirical results do not only constrain the significance of those ranking studies currently in vogue, which assume a noteworthy responsibility of states for their own economic situation. These results are also of importance for the political discussion on the reform of German intergovernmental fiscal relations.

China's health system and its reform: a review of recent studies

This paper provides a survey of the recent empirical research on China's 'old' health system (i.e. prior to the spate of reforms beginning in 2003). It argues that this research has enhanced our understanding of the system prior to 2003, in some cases reinforcing conclusions (e.g. the demand-inducement associated with perverse incentives) while in other cases suggesting a slightly less clear storyline (e.g. the link between insurance and out-of-pocket spending). It also concludes that the research to date points to the importance of careful evaluation of the current reforms, and its potential to modify policies as the rollout proceeds. Finally, it argues that the research on the pre-2003 system suggests that while the recently announced further reforms are a step in the right direction, the hoped-for improvements in China's health system will far more likely occur if the reforms become less timid in certain key areas, namely provider payments and intergovernmental fiscal relations.

A Survey of Perspectives on Intergovernmental Relations: A Comparative Analysis of the Czech and Slovak Republics

The results of a survey of local government officials from the Slovak and Czech Republics taken in December of 2005 are presented and analysed. Attitudes about and perspectives on intergovernmental fiscal relations in the two republics are probed. Differences and similarities in Czech and Slovak views are established regarding some of the perceptions of local autonomy and the sufficiency of available funds; whether or not public services are supplied by the appropriate levels of government; the potential benefits of adopting a serious rather than a nominal property tax; and the flexibility of local budget planning in Czech and Slovak cities and towns.

Options of Intergovernmental Fiscal Relations Reform in the Ukraine

Reform of the system of public finance is a key problem in the transformation processes of the Ukraine’s economy. Development of efficient methods of financial policy is especially important in the context of strategic challenges of economic growth, the competitiveness of the national economy, and convergence of the level of socio-economic development between different regions of the country. Most elements of the modern system of the Ukraine’s public finance were formed as far back as during the Soviet era, under the conditions of command and administrative economy, when neither the state budget, nor the local ones played any active role, but were a mere monetary reflection of the plans of socio-economic development. On the other hand, in market economies, public finance plays an important role in the provision of economic growth and efficient use of national economic resources, as well as in the solution of the problems related to social equity.During recent years, the attempt to reform intergovernmental fiscal relations in the Ukraine have failed either to create a well-balanced system for the distribution of powers between central state authorities and local government, or to elaborate adequate and transparent mechanisms for the formation of local budgets. The reason is that most problems of the local budgets are mostly treated by policy makers and local authorities in the context of the need to provide local budgets with “sufficient” financial resources.We emphasize that creation of an efficient budget system is not limited to a mere re-distribution of revenues between central and local budgets. Investigation of theoretic and methodological foundations of the development of the components of the system of public finance and intergovernmental fiscal relations in the Ukraine let us conclude that such development should be based on the use of economic principles and criteria as to the distribution of powers between the central authorities and local government. Furthermore, a consistent fiscal policy is needed, which would promote not only the convergence between the local budgets’ expenditures, but also, and first of all, the regions’ socio-economic development.

Moderating Local Capacity: Exploring EO 12372's Intergovernmental Review Effects on Federal Grant Awards

This article asks whether the Reagan Executive Order (EO) 12372 matters for intergovernmental fiscal relations today. To address this question, federal grant receipts from programs that are, and programs that are not, covered by EO 12372 are compared by examining the differential effects of political and local administrative capacity on each. Grant receipts are examined by coding federal grant award data from 1993 to 2003 using Catalog of Federal Domestic Assistance reference numbers. In the case state, Kentucky, Area Development Districts are the regional functionaries for the state single point of contact clearinghouse, by virtue of which status they review proposals for federal funding originating in, or affecting, their districts. Since federal award decisions take clearinghouse information into account on grant programs covered by EO 12372, differences in the effects of local capacity on receipt of grants covered and not covered by the EO are expected. Methodology used in this post‐only analysis is pooled cross‐sectional time series analysis with panel corrected standard errors. Results focus attention on the differential effects of government administrative and political capacity as they apply to federal grants covered, and not covered, by the EO.

Fiscal Federalism and Decentralization in India

This paper surveys the state of fiscal federalism in India, in the broader context of decentralization. We begin with an overview of the basic features and recent developments in the intergovernmental fiscal relations, including the role of political institutions, the specifics of legislative and budgetary autonomy, assignments of expenditure responsibility and revenue authority, revenue collection mechanisms, the system of intergovernmental transfers, and institutions and mechanisms for borrowing by subnational units. We then provide a diagnosis of accountability mechanisms, examining their quality of functioning and distortions and constraints. In particular, we analyze to what extent, and through what mechanisms, lower-level governments are held accountable to higher-level governments, the extent to which policies of subnational governments to credit ratings and bond yields, and the accountability in the provision of subnational public goods. Next, we review the implications of the intergovernmental system and accountability mechanisms on the cooperation of subnational governments and the quality of service delivery. We examine the resources and capacity of the subnational entities that are responsible for key services such as water, sanitation, education and health care, and the impacts of decentralization of service quality and the distribution of benefits among elected officials, citizens and interest groups. Finally, we offer a concluding assessment with suggestions for reform priorities.

Russian Federalism at the Critical Stage of Development

Transformations in the sphere of federal relations concern the most important directions of the reforming processes in the country. However, not all proposed and actually developing components of the federal reform seem well-argued and corresponding to long-term, strategic interests of the Russian statehood. The basic course of reform should meet the objective requirements of further decentralization of governing economic and social processes and the need to ensure strengthening the responsibility of RF subjects’ executive bodies and local self-management for steady social and economic development of their territories. The solution of these problems calls for a new model of federal policy of regional development, specification of some important components of the municipal reform as well as inserting certain amendments into the system of intergovernmental fiscal relations in order to stir up their stimulating function.

FISCAL ILLUSION AT THE LOCAL SPHERE: AN EMPIRICAL TEST OF THE FLYPAPER EFFECT USING SOUTH AFRICAN MUNICIPAL DATA1

AbstractWhile South Africa operates a relatively decentralised governance and administrative structure, an important feature of the country's intergovernmental fiscal relations system is the gap that exists between the expenditure responsibilities of sub‐national authorities and their assigned revenue bases. The resulting vertical fiscal imbalance is mainly addressed via significant intergovernmental transfers to provinces and local governments. This factor presents strong a priori grounds for assuming that in the South African context, the heavy dependence of many local governments on intergovernmental transfers may generate fiscal illusion. Despite this, there have not been many empirical studies of fiscal illusion in South Africa's intergovernmental transfer system. This paper extends existing literature on fiscal illusion by using the fiscal year 2005/06 financial and expenditure data from 237 local government authorities in South Africa to evaluate the flypaper variant of the fiscal illusion hypothesis. Empirical results indicate that the marginal effects of municipal own‐source revenues on local expenditure exceed those of intergovernmental transfers. No statistical evidence in support of the flypaper hypothesis within the context of municipal expenditures in South Africa is found.

Fiscal Federalism: An Unlikely Bridge between the West and Quebec

Is there common ground in intergovernmental fiscal relations? This question is tackled by examining the ongoing federal-provincial debate about the most appropriate way to allocate resources among governments and the related issue of vertical and horizontal fiscal imbalance. It turns out that the provinces have found common ground with respect to vertical imbalance and the need to limit Ottawa’s spending power. The Equalization program, however, illuminates significant differences not only between Quebec and the western provinces but also among the four western provinces themselves. Fiscal federalism raises too many divisive issues for anyone to hope that these differences can all be settled in the foreseeable future.

Decentralization And Public Delivery Of Health Care Services In India

This paper examines delivery of public health care services in India, in the broader context of decentralization. It provides an overview of the basic features and recent developments in intergovernmental fiscal relations and accountability mechanisms, and it examines the implications of these institutions for the quality of public service delivery. It then addresses recent policy proposals on the public provision of health care, in the context of decentralization. Finally, it makes suggestions for reform priorities to improve public health care delivery.

The Primacy of Politics: Intergovernmental Fiscal Relations in the UK and Australia

Interest in Barnett formula reform is on the rise again, particularly because of changes in the parties in power in the devolved governments of Scotland and Wales, and the tighter public spending heralded by the recent Comprehensive Spending Review. This article looks at whether, and to what extent, the introduction of an alternative fiscal allocation system would remove the primacy of politics from the UK's resultant intergovernmental fiscal relations, through examination of the Australian experience, especially the role of Special Purpose Payments.

Public Debt in Germany: At the Turning Point or Ever-Increasing?

Since 1970 public debt in Germany has risen dramatically. The debt growth has neither been stopped by the constitutional deficit limit, nor by the European Stability and Growth Pact. At the moment, the cyclical upswing triggers increasing tax revenues and diminishing deficits. Yet this does not mean that fiscal fundament is sustainable. What are the chances for a structural consolidation of public finances? Which institutional reforms must be envisaged? Can these changes be accomplished in the planned second round of the reform of intergovernmental fiscal relations?

Fiscal Institutions and the Relation between Central and Sub-National Government Fiscal Balances

Skeptics of fiscal decentralization argue that it can complicate fiscal stabilization policies at the level of the central government because of uncoordinated fiscal actions by the national and sub-national tiers of government. However, panel data estimates for Organisation for Economic Co-operation and Development economies suggest that this danger has been overstated in that changes in the fiscal balances of central and sub-national governments are highly positively correlated. This result partly reflects the success of institutional arrangements that govern intergovernmental fiscal relations and appears unrelated to the extent of fiscal decentralization.

A nagyvárosi kormányzatok és az önkormányzati rendszer

A tanulmány a városi kormányzatokkal kapcsolatos nemzetközi irodalom rövid áttekintése után a magyar nagyvárosok helyzetét tárgyalja két összefiiggésben: egyrészt az önkormányzati rendszeren, másrészt pedig az állam és a magánszektor kapcsolatrendszerén keresztül. A dolgozat arra a következtetésre jut, hogy a nagyvárosok a magyar önkormányzati rendszeren belül egyfajta speciális érdekcsoportot jelentenek, amelyek egyrészt meghatározó politikai súllyal rendelkeznek a területi folyamatokban és a központi költségvetési politikában, másrészt pedig adottságaik révén a gazdasági fejlődés „növekedési pólusait" képviselik.

Subnational Taxes in Developing Countries: The Way Forward

This paper reviews the literature and evidence on the most appropriate structure of regional and local taxes in developing countries. A good subnational tax system is critical to an effective and sustainable system of intergovernmental fiscal relations - a need that has become increasingly important around the world as more and more public services are being delivered through subnational governments. In most developing countries potentially sound and productive taxes exist that are suitable for regional and local governments: property taxes, taxes on motor vehicles, surcharges on national personal income taxes, payroll taxes, and even, in some cases, regional value added taxes and properly designed local business taxes.

Clientelism and Ethiopia's post-1991 decentralisation

ABSTRACTThis article addresses the question of why Ethiopia's post-1991 decentralisation reform is not taking the desired direction of matching diverse needs with available resources and creating accountable, responsive and autonomous regional governments. Given regional governments' relatively diverse socio-economic positions, the intention of the reform to create autonomous regions with devolved administrative, fiscal and political power is appropriate. Nonetheless, the implementation of the elements of the reform – expenditure assignment, revenue assignment, intergovernmental fiscal transfer and sub-national borrowing – is flawed. Existing studies that question the effectiveness of Ethiopia's devolution focus on political or fiscal aspects, and fail to link the de facto centre-region political power relationship with intergovernmental fiscal relations. This article, based on detailed field research in three regional governments, argues that the flawed intergovernmental fiscal relations reform is best explained by the clientelistic relationship between central and regional political parties.

SOUTH AFRICA'S INTERGOVERNMENTAL FISCAL RELATIONS: AN EVOLVING SYSTEM

AbstractAcross Africa, Latin America, Asia and the transition economies of Eastern Europe, the need to enhance the capability and capacity of sub‐national governments (SNGs) in providing public goods and services has become a main theme of development programmes. Central to this theme is the need to design an intergovernmental fiscal relations (IGFR) system that enhances the effectiveness of sub‐national governments in mobilizing revenues and implementing expenditure programmes. For South Africa, the post‐1994 dispensation has involved significant reforms to the structure and administrative capacity of the three spheres of government. Critical to these reforms is the need to formulate an IGFR framework that takes cognisance of South Africa's past, and serves as an effective policy tool in ensuring that public sector service delivery is well structured and managed.This paper provides an analysis of South Africa's evolving IGFR system. It outlines the historical evolution of the current IGFR system, identifies current challenges, and discusses implications that these challenges have for the functioning of the IGFR system. The general conclusion emerging from this study is that in the South African context, the key elements necessary for an effective IGFR system are in place. Ongoing reforms have improved the capacity of provincial and municipal authorities in carrying out their revenue and expenditure responsibilities. However, the evolving nature of South Africa's IGFR system requires that significant attention be devoted towards enhancing coordination between delivery departments and improving the capacity of many SNGs. These should not only aid the effective functioning of the IGFR system but also ensure that the gains of decentralisation are sustainable.

George W. Bush's Federal Aid Legacy

Most presidents since 1933 upon taking office have unveiled plans that subsequently defined or redefined the fiscal between the national government and state and local governments. The New Deal that was fashioned by FDR and the Democratic majority in Congress resulted in an explosion of new federal grant-in-aid programs, and by the end of the Great Depression, billions of dollars were being transferred from the national government to the states and their local governments on an annual basis. However, it must be understood that Franklin Roosevelt and his fellow Democrats in Congress probably did not intend to reshape intergovernmental fiscal relations as much as they sought to provide relief to the economic misery that enveloped the country during this period, and they concluded that the national government was the only government that was up to this Herculean challenge. Unlike Roosevelt, Dwight Eisenhower did come into office with a federalism vision and a determination to methodically sort out functional and fiscal responsibilities in our federal system. To assist in this endeavor, Eisenhower called for the establishment of the Commission on Intergovernmental Relations (better known as the Kestnbaum Commission) in 1953. Later, Eisenhower was able to capitalize on the visibility and political attention created by the Commission's report to persuade Congress to establish the former U.S. Advisory Commission on Intergovernmental as a means to direct concerted attention to interlevel relationships (Benton 2006). However, perhaps the greatest attention given to federalism issues, occurred during the Nixon and Reagan administrations. Upon assuming the presidency in 1969, Richard Nixon unveiled what he called his New Federalism, in which he promised to return responsibility for the implementation of many federally funded programs to the states and their local governments via a series of block grants with few strings attached, while also providing them with a new and almost unrestricted type of federal funding-revenue sharing. And, in spite of the fact that Democrats controlled Congress during Nixon's presidency, the Congress agreed with most of his proposals (Conlan 1988). Ronald Reagan, seeking ways to balance