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Fiscal Consolidation Across Government Levels - Part 1. How Much, What Policies?

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  • Hansjörg Blöchliger

    (OECD)

Abstract

This paper provides an overview of fiscal consolidation efforts at the central and sub-central government level, both during the current and past consolidation episodes. After experiencing a deficit and debt hike during the crisis, sub-central debt is mostly stabilising. So far, sub-central consolidation has been mainly achieved through spending cuts, while overall revenues remained largely stable. Sub-central tax revenues rose a bit, but intergovernmental transfers went down slightly. Sub-central governments in a few countries need to consolidate further, if they want to reach debt levels of 2007 or 2011 by the year 2026, as shown by fiscal gap calculations. During past consolidation episodes, sub-central consolidation increased the probability of debt stabilisation at the general government level. Reductions in intergovernmental grants improved the success rate. Central and sub-central deficits tended to move in parallel, although some subcentral governments experienced a “second trough” three or four years after consolidation had started. The paper suggests a number of instruments that could help sub-central governments consolidate their budgets, and argues in favour of amendments to sub-central fiscal rules. Assainissement budgétaire aux différents niveaux d'administration - Partie 1. Quelles politiques pour quel degré d'assainissement ? Le présent rapport offre une vue d’ensemble des efforts d’assainissement budgétaire déployés par les administrations centrales et infranationales, aussi bien dans le cadre de l’actuelle phase d’assainissement qu’au cours des phases antérieures. Après une augmentation de leur déficit et de leur dette pendant la crise, les administrations infranationales voient leur dette se stabiliser d’une manière générale. À ce jour, elles sont essentiellement parvenues à assainir leurs finances en réduisant les dépenses, tandis que les recettes globales sont restées stables dans une large mesure. Si les recettes fiscales des administrations infranationales ont progressé de façon modérée, les transferts interadministrations ont enregistré une légère baisse. Dans quelques pays, les administrations infranationales doivent assainir davantage leurs finances si elles veulent atteindre les niveaux d’endettement de 2007 ou 2011 d’ici 2026, comme le montrent les chiffres de l’écart sur l’ajustement budgétaire. Les précédentes phases d’assainissement des finances publiques au niveau infranational ont accru la probabilité de stabilisation de la dette au niveau de l’État. Les réductions des dons interadministrations se sont traduites par une amélioration du taux de réussite. Les déficits publics aux niveaux central et infranational ont généralement évolué en parallèle, bien que certaines administrations infranationales aient enregistré une « rechute » trois à quatre ans après le début de la phase d’assainissement. Un certain nombre d’instruments susceptibles d’aider les administrations infranationales à assainir leurs finances sont proposés dans le rapport, où il est également préconisé d’apporter des modifications à leurs règles budgétaires.

Suggested Citation

  • Hansjörg Blöchliger, 2013. "Fiscal Consolidation Across Government Levels - Part 1. How Much, What Policies?," OECD Economics Department Working Papers 1070, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:1070-en
    DOI: 10.1787/5k43nxr99zd6-en
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    Cited by:

    1. Lars P. Feld & Ekkehard A. Köhler & Julia Wolfinger, 2020. "Modeling fiscal sustainability in dynamic macro-panels with heterogeneous effects: evidence from German federal states," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(1), pages 215-239, February.
    2. Virkola, Tuomo, 2014. "Fiscal Federalism in Four Federal Countries," ETLA Reports 38, The Research Institute of the Finnish Economy.
    3. Falilou Fall & Debra Bloch & Jean-Marc Fournier & Peter Hoeller, 2015. "Prudent debt targets and fiscal frameworks," OECD Economic Policy Papers 15, OECD Publishing.
    4. Dirk Foremny & Agnese Sacchi & Simone Salotti, 2017. "Decentralization and the duration of fiscal consolidation: shifting the burden across layers of government," Public Choice, Springer, vol. 171(3), pages 359-387, June.

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    More about this item

    Keywords

    assainissement des finances publiques au niveau infranational; dette des administrations infranationales; fiscal consolidation at sub-national level; fiscal federalism; fédéralisme budgétaire; politique budgétaire au niveau infranational; sub-national debt; sub-national fiscal policy;
    All these keywords.

    JEL classification:

    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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