Lower Tiers Of Government Research Articles

Tax competition for FDI: China’s exceptional approach

In this Policy Watch study, we explore the different approaches to corporate income tax (CIT) setting in three economically significant regions: USA, EU, and People’s Republic of China (PRC). We characterize tax-setting in the three regions as occurring at three hierarchical levels and examine the impact of this on tax competition. We find that there is considerable heterogeneity across the regions. The approach in the PRC is particularly notable. While the PRC has established centralized rate of CIT at the highest level, it is unique in having a tax-sharing system with its lower tiers of government. This connection between the different levels of government within the PRC plays a crucial role in China’s unique CIT rate-setting agenda that results in intense and tacit inter-jurisdictional tax competition.

Supplying the pandemic response: The importance of public procurement

The rapid global transmission of COVID-19 has demonstrated many weaknesses in government procurement of essential supplies. In the United States, these problems have been particularly evident, as systemic fragmentation through federalism has frustrated a coordinated response. Rather than working together, states and localities are competing over limited medical resources, while the federal government has not stepped in to alleviate burdens on the lower tiers of government. In this study, we introduce how procurement is managed under normal circumstances and how it changes during emergencies. Easing procurement rules comes with necessary tradeoffs, particularly involving equity and accountability. Using case studies from recent disasters, we identify procurement and management recommendations for the COVID-19 response and future emergencies. We conclude that public procurement is integral to effective management in the 21st century and must be treated as such in the study and practice of public administration and emergency management.

Postcode Lottery or Systematic Differences in Norwegian Elder Care Provision?


 
 
 The Nordic welfare states are considered to be universalistic and to provide generous benefits and services. National equality presupposes centralised schemes implemented through national agencies. In the Nordic countries, the municipalities calibrate and pro- vide care services. This article asks what are the reasons for municipal variation in elder care services provision in Norway? Building on theories of local autonomy, the expla- natory variables are the state monetary transfer system, local government, municipal demography and structure, and path dependency. The data consists of municipal registry data from Statistics Norway. The main finding of a regression analysis of data from 2014, is that the state transfer system is the principal variable explaining the current municipal variation in elder care services in Norway. The conclusion is that policies at the national level matter more than local politics and needs when explaining the current differences in service provision between municipalities. The finding enlightens the blame-shifting between higher and lower tiers of government concerning the perceived shortcomings in elder care services provision, and suggests that a revision of the monetary transfer system might be more appropriate than increased legislation if the aim is decreased municipal differences in this area.
 
 

Who is responsible? Local government and accountability for service delivery in Kenya’s devolved health sector

One of the arguments in favour of local governments is their ability to deliver public services better because of their proximity to demand. This is typically achieved through decentralisation – the transfer of some level of formal responsibility, authority and/or resources to smaller, lower tiers of government. This paper examines service delivery in the health sector in Kenya within the context of the country’s newly introduced devolved system of government, which created 47 county governments under the 2010 Constitution. It examines three key responsibilities: i) resource mobilisation, distribution and administration, ii) decision-making, and iii) political accountability, and their bearing on outcomes for delivery of health services. The paper argues that devolution of the health function in Kenya has been only partial, leading to challenges of coordination between the national and county governments and ambiguity over responsibility for service delivery; both factors which risk undermining the opportunities that devolution creates or promises.

Decentralization and the duration of fiscal consolidation: shifting the burden across layers of government

This paper analyzes the relationship between fiscal decentralization, the duration of fiscal consolidation episodes, and their success for 17 OECD countries between 1978 and 2009. The consolidation of the general government budget appears to be of longer duration when expenditure decisions are more decentralized. We also find that transfers from higher levels of government are cut during consolidation episodes, suggesting that central governments shift the burden of consolidation towards lower tiers of government. This is especially true when the latter have little legal autonomy to raise tax revenues and have little influence over executive decisions taken at the central level. We document that this increases local governments’ public debt/GDP ratios. In terms of the success of consolidation episodes, countries with greater degrees of decentralization appear to make smaller improvements in their primary balance when consolidating.

Getting depleted resource-based cities back on their feet again – the example of Yichun in China

Sustainable consumption and production (or lack thereof) can leave very distinct marks at the city level. Among the cities aiming at sustainable development, resource-based cities (RBCs) are of special concern due to the tight interrelations economy, urban development, natural resources and environmental context have in them. Excessive exploitation and inefficient resource utilization often cause pollution and ecological risks. As natural resources are getting exhausted, their resource-based industries will collapse, threaten wider urban development and lead to economic recession. In this article, we focus on the economic and ecological dilemmas that the RBCs face in China. We first present an overview of China's policy implementation for rescuing and transforming RBCs. Then a particular RBC, Yichun, which is classified as “recessionary”, is analyzed to understand the challenges that it faces during its transition. The method of eco-efficiency is used to uncover Yichun's environmental performance in relation to its economic development. Subsequently, we explore the barriers in terms of industrial transformation, conflicts between national, provincial and local governmental actions, and the effects of the circular economy in Yichun. At the end of this article, we formulate several recommendations to facilitate Yichun's sustainable development. We propose that Yichun specifically needs to consider the energy consumption and pollution when selecting alternative industries. Furthermore, one-size-fits-all policies do not help to solve the problems in Yichun. Policies need to be contextualized locally through well-reflected coordination between higher and lower tiers of government.

Challenges to implementing of development plans at local-level government in Papua New Guinea

The 1995 local-level government reforms undertaken in Papua New Guinea (PNG) were largely in response to increasing concern that the public service was failing in its responsibility towards the people. As a result, the 1995 Organic Law on Provincial and Local Governments (OLPLLG) was established. The prime purpose of this was to address this issue through deeper engagement of the lower levels of government, particularly local-level governments (LLGs). Almost two decades on, poor socio-economic conditions and deterioration in infrastructure/services suggest that the proposed change has not materialised. The purpose of this paper is to address the question of whether the lower tiers of government are capable of implementing the development plans under the reforms. The paper finds that the 1995 reforms have made LLGs dependent upon their Joint District Planning and Budget Priorities Committee (JDP & BPC) and their district administration, which have become the main impediment to local government effectiveness. This in turn has greatly hindered LLG capacity and has reinforced unequal relations, rather than assisting service delivery in PNG. There is therefore a need to make LLGs more effective players.

A Review of the Promises and Challenges of the 2004 Pension Reform in Nigeria

This paper uses a descriptive historical method to assess the 2004 pension reform in Nigeria. It examines the promises of the reform vis-a-vis the pre-reform crisis-ridden pension administration in both public and private sectors. The paper underscores some prospects of the new scheme which are mainly in the areas of regulation, third party administration by professional institutions and funding but identifies other challenges such as spread and coverage, slow pace of acceptance by lower tiers of government and corruption. The authors point to the fact that most of the criticisms against the introduction of the scheme are based on economic projections which could be neither here nor there, and, which could be controlled by diversification in pension fund investments. It is underscored that a mandatory contributory pension scheme should be distinguished from poverty relief programme and universal social security benefits to avoid scheme overloading. Above all, there is need for enlightenment directed towards the employees understanding their rights and demanding it from the employers as concerning private sector coverage. DOI: 10.5901/mjss.2014.v5n15p472

The Curious Absence of Inter-municipal Cooperation in England

In Europe local authorities often work with their neighbouring municipalities, whether to address a specific task or goal or through the course of regular policy making and implementation. In England, however, inter-municipal co-operation (IMC) is less common. Councils may work with service providers from the private and non-profit sectors but less often with neighbouring local authorities. Why this is the case may be explained by a number of historical and policy factors that often encourage councils to compete, rather than to work collaboratively with each other. The present government has encouraged councils to work in partnership with other organizations but there are few examples of increased horizontal cooperation between local authorities. Instead the prevailing model remains fixed on vertical co-working predicated on a principal-agent relationship between higher and lower tiers of government.

Port devolution revisited: the case of regional ports and the role of lower tier governments

Most models of port governance have been developed to fit the largest ports, and tend to simplify the devolution process as one involving the transfer of jurisdiction from the State to the private sector. The devolution of smaller ports has been largely ignored as have transfers involving transfers from upper levels of government to lower tiers of public administration. Yet in many countries this has been the experience of port governance, where complex structures have arisen, many of which involve public control, in contrast to the strongly privatised process covered in the literature. The objective of this paper is to examine the process and consequences of changing port governance involving small and medium size ports where lower tiers of government are involved. It examines the recent devolution process in Canada and the decentralization policy in France. It brings to light the diversity of actors, public and private, who have come into play. The paper goes on to examine the challenges that have come about as a result of devolution that face the new port administrations. The paper concludes that existing models of port governance are incomplete and that the role of public administration in port governance is greater, albeit in a different form, than claimed in the existing literature.

Fiscal Federalism, Fiscal Consolidations and Cuts in Central Government Grants: Evidence from an Event Study

This paper contributes to a developing literature that examines financial interactions between different levels of government. More specifically, we investigate the use of grants, shared tax revenues, and their impact on fiscal outcomes, including decentralized service provision. Most existing empirical evidence has focused on individual country studies, and has predominantly been US based. However, it is difficult to generalize the conclusions obtained for the US to countries where the position and remit of lower tiers of government has recently been evolving or is less clear constitutionally. We use a panel dataset covering 15 OECD countries to investigate how central and sub-central expenditures, taxation, and intergovernmental grants change in response to central governments' attempts to correct their fiscal positions. We adopt an event study methodology to examine the timing of expenditure, taxation and intergovernmental grant shifts around the periods of fiscal consolidation. In addition to highlighting issues regarding the interaction between central and sub-central tiers of government, our analysis also sheds light into the extent to which sub-central tiers of government participate in fiscal consolidations, and hence to macroeconomic adjustment. Our key results can be summarized as follows. First, successful fiscal consolidations are generally driven by similar, and sustained, falls in expenditure at both central and sub-central tiers. Moreover, our evidence counters that identified by Gramlich (1987) for the USA, in that when central governments cut intergovernmental grants sub-central tiers do not take redress through offsetting increases in other forms of revenues. Second, unsuccessful consolidations tend to be characterized by increased central government taxation, with no fall back in grants and no tendency for sub-central taxation to change. It does appear that there is strong correlation between success in consolidating central fiscal deficits and similar actions from lower tiers of government. Third, we find that where consolidations are successful sub-central tiers of government are typically forced to cut back on capital expenditure. This suggests that in this regard the burden of adjustment falls onto lower tiers of government and central governments worry less about the long-term (i.e. public investment) consequences of consolidation if these decisions are taken at local level. We also find that when faced with cuts in intergovernmental grants, sub-central governments tend to maintain expenditures on wages at the expense of capital expenditure, reflecting a definite compositional switch towards public consumption. This might be interpreted as a variant of the effect identified by Gramlich (1987): sub-central governments seeking to defend current services rather than spending on infrastructure or raising taxation. This may reflect the greater constraints on sub-central tiers’ tax raising powers in many of the OECD countries in our sample, relative to those in the USA. Finally, our results shed some light, at least indirectly, on the ‘Fly-paper Effect’, by showing that it operates in reverse. Successful consolidations are characterized by cut-backs in grants that are more than offset by cut-backs in sub-central expenditures. In contrast, periods of unsuccessful consolidation are characterized by increases in central taxation, no change in grants, and small, temporary reductions in sub-central expenditure.

An Economic Analysis of Fiscal Federalism in Ethiopia

An Economic Analysis of Fiscal Federalism in Ethiopia Abu Girma Moges Introduction A growing number of countries have adopted fiscal federalism in an effort to improve the performance of their public sector. The underlying theme of the reforms is restructuring the public sector and improving its efficiency. In the context of fiscal policy, the reforms entail decisions in identifying the optimal distribution of functions and powers between the federal and subnational governments and providing fiscal decision-making power to subnational governments. This process introduces specialization of functions and changes the very relationship between the government and the citizen-voters in important ways. Fiscal federalism is essentially the choice and distribution of fiscal decision-making power across multilevel governments. The adoption of fiscal decentralization in most countries has meant a clear departure from their practice of operating a centralized fiscal system within a unitary political regime. The failure of the centralized system of economic and political administration is one of the forces behind the temptation of a number of countries to experiment with some forms of decentralization of both political and fiscal power. Some countries implemented fiscal decentralization whereas others opted for de-concentration of centralized decision making without actual fiscal decentralization.1 In some cases, fiscal decentralization followed the political imperative of establishing a federal political structure. Fiscal decentralization has economic effects and particularly affects the utilization and allocation of public resources. Whereas decentralized [End Page 111] fiscal decision making generates efficiency gains, the significance of such gains needs to be measured relative to what the process entails in terms of distribution and macroeconomic stability objectives. Moreover, undertaking fiscal decentralization before local institutional capacity is developed might involve significant economic cost and inefficiency in resource utilization.2 After all, partial decentralization may not necessarily bring to the people at the grass-roots level improved governance and accountability that responds to local priorities and preferences. Fiscal federalism in Ethiopia, the subject of this article, has been adopted within a unique political landscape of ethnic federalism. The Tigray People's Liberation Front (TPLF)–led government that replaced the Derg has redrawn the political map of the country and adopted an ethnic-based federal government structure. This experiment has been formalized in the 1994 Constitution. However, the constitutional provisions operate with a political centralism that has remained the distinguishing feature of the current political system. The theme of this article is that fiscal federalism in the context of ethnic politics and de facto political centralization hampers the realization of the economic potential of the country and hence constrains efforts to address core economic problems. I address the economic prudence of pursuing fiscal decentralization in a poor country and the ways in which such a policy affects fiscal discipline, resource allocation, and efficiency of resource utilization as well as the growth performance of sectors in the economy. The rest of the article is organized as follows. The next section reviews the main strands of the theory of fiscal federalism and develops an economic argument on issues of fiscal federalism; the following sections review the fiscal system of Ethiopia and address the issues involved in the practice of fiscal federalism in Ethiopia and their implications for fiscal performance. The final section makes concluding remarks and highlights areas for policy action. The Theory of Fiscal Federalism Fiscal federalism refers to a process of distribution and redistribution of fiscal decision-making power across multilevel governments. It derives its nature and characteristics from constitutional provisions as well as [End Page 112] the state of economic development, the pattern of income and resource distribution, and the institutional capacity of the system. The constitutional provisions define the framework within which decision making will be exercised and establish the vertical and horizontal structures that find meaning within the socioeconomic environment prevailing in the system. The vertical structure defines the assignment of fiscal decision-making power between the federal and the lower tiers of government. The horizontal structure outlines the nature of interaction across cross-sections of government levels. The main economic objectives of fiscal decentralization are improving the efficiency of the public sector, creating an enabling environment for private sector development, and promoting economic growth. However, fiscal decentralization also affects other...

Economic Aspects of Decentralized Government: Structure, Functions and Finance

Local government Gordon Hughes and Stephen Smith Many OECD countries are uncomfortable with the structure and financing of their decentralized governments. In some, the pressures for change have even led to tax revolts. Much of the existing economic literature on decentralization considers that the purpose of local governments is to decentralize decisions. Lower tiers of government are assigned local public goods and matching taxes. This contrasts with actual arrangements. The patterns of government decentralization in OECD countries are diverse. Most local governments in Europe actually perform a major administrative role, in effect acting as agents for the central government. While this is justified by the advantages that local governments have over central governments in terms of information and control by voters, such arrangements require large financial resources, and more control by central government than where local governments simply provide local public goods. A drawback is the potential for conflict between different tiers of government. The trend towards more decentralization, common to most countries, has had to be met by more taxation or more grants. The need for revenue has encouraged a move away from property taxes to broader-based local taxes. Tax-sharing arrangements have often been under-rated, but in practice they compare favourably with complex and discretionary systems of transfers between levels of government.

Financing lower tiers of Government: a European perspective

Financing lower tiers of Government: a European perspective