Fiscal consolidation and decentralisation: a tale of two tiers
AbstractThis paper contributes to the established literature on fiscal consolidations by investigating the distinct behaviour of central and sub-central tiers of government during general government consolidation attempts. In the light of different degrees of decentralisation across OECD countries, and the different responsibilities devolved to sub-central tiers, we believe that this approach offers an illuminating insight into the analysis of fiscal consolidations and their success. We show that the involvement of the sub-central tiers of government is crucial to achieving cuts in expenditure, particularly in relation to the overall size of the government wage bill. In addition, central governments appear to exert a strong influence on the expenditure of sub-central tiers through their grant allocations, and control of these allocations appears to have a considerable impact upon the overall success of consolidation attempts. Finally, we demonstrate that there is a skewness in cuts towards sub-central capital expenditure both when central governments cut grant allocations and when sub-central governments engage in lone consolidation attempts.
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Bibliographic InfoArticle provided by Institute for Fiscal Studies in its journal Fiscal Studies.
Volume (Year): 26 (2005)
Issue (Month): 2 (June)
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Postal: The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE
Other versions of this item:
- Julia Darby & V. Anton Muscatelli & Graeme Roy, 2004. "Fiscal Consolidation And Decentralisation: A Tale Of Two Tiers," Working Papers 2004_2, Business School - Economics, University of Glasgow.
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
- H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
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