Centralized or decentralized financing of local governments? Consequences for efficiency and inequality of service provision
AbstractCompared with most countries the Norwegian system of financing local governments is highly centralized. Grants make up a substantial part of revenues and local taxes are highly regulated by the center. The development of the system was motivated by a desire to equalize service provision throughout the country. The purpose of this paper is to analyze possible consequences of more decentralized financing with local tax discretion. Contrary to the conventional wisdom the analysis indicates that decentralized financing is likely to give more equal provision of local public services. In addition, substantial efficiency gains can be obtained.
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Bibliographic InfoPaper provided by Department of Economics, Norwegian University of Science and Technology in its series Working Paper Series with number 7806.
Length: 28 pages
Date of creation: 06 Dec 2006
Date of revision:
Centralized financing; Decentralized financing; Tax discretion; Efficiency gains; Equalization;
Find related papers by JEL classification:
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
- H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-12-09 (All new papers)
- NEP-HIS-2006-12-09 (Business, Economic & Financial History)
- NEP-PBE-2006-12-09 (Public Economics)
- NEP-URE-2006-12-09 (Urban & Real Estate Economics)
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