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Fiscal Consolidation Across Government Levels - Part 2. Fiscal Rules for Sub-central Governments, Update of the Institutional Indicator

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  • Kaja Fredriksen

    (OECD)

Abstract

Fiscal rules that constrain sub-central government (SCG) budgeting are very common across the OECD, but there are substantial cross-country differences in their implementation and impact. This paper presents the 2011 update of the fiscal rules database established in 2005. As in 2005, budget balance objectives are the most common form of rule along with borrowing constraints, while limits on SCG expenditure are rare. Because of trade-offs between objectives that fiscal rules must cater to, cross-country variation in the value of the composite indicator is low. There is, however, much more variation in country scores for the individual objectives of fiscal rules. Despite the increased focus on sustainability in public finances over recent years, indicator values have changed little since 2005 except for a few countries. This suggests that the sub-central fiscal rules framework was in place well before the recent crisis struck. Assainissement budgétaire aux différents niveaux d'administration - Partie 2. Les règles budgétaires s'appliquant aux collectivités territoriales : mise à jour de l'indicateur institutionnel Les règles budgétaires encadrant l’établissement des budgets des administrations infranationales sont très courantes dans la zone de l’OCDE, mais leur mise en oeuvre et leur impact diffèrent grandement selon les pays. Le présent rapport expose la mise à jour 2012 de la base de données sur les règles budgétaires établie en 2005. En 2005, les règles les plus couramment utilisées sont les obligations d’équilibre budgétaire et la limitation des emprunts, tandis que la limitation des dépenses des collectivités locales est rare. En raison d’arbitrages entre les différents objectifs des règles budgétaires, la valeur de l’indicateur composite varie peu d’un pays à l’autre. Les écarts sont toutefois beaucoup plus marqués dans les notes nationales attribuées aux différents objectifs des règles budgétaires. Malgré l’importance accrue accordée, ces dernières années, à la viabilité des finances publiques, les valeurs de l’indicateur ne varient guère depuis 2005, excepté pour un petit nombre de pays. Cela donne à penser que le cadre de règles budgétaires applicable aux collectivités territoriales était en place bien avant la récente crise.

Suggested Citation

  • Kaja Fredriksen, 2013. "Fiscal Consolidation Across Government Levels - Part 2. Fiscal Rules for Sub-central Governments, Update of the Institutional Indicator," OECD Economics Department Working Papers 1071, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:1071-en
    DOI: 10.1787/5k43nxqzhkr1-en
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    References listed on IDEAS

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    1. Jonathan Rodden & Erik Wibbels, 2010. "Fiscal Decentralization And The Business Cycle: An Empirical Study Of Seven Federations," Economics and Politics, Wiley Blackwell, vol. 22(1), pages 37-67, March.
    2. Kaja Fredriksen, 2013. "Decentralisation and Economic Growth - Part 3: Decentralisation, Infrastructure Investment and Educational Performance," OECD Working Papers on Fiscal Federalism 16, OECD Publishing.
    3. Jiri Jonas, 2012. "Great Recession and Fiscal Squeeze at U.S. Subnational Government Level," IMF Working Papers 2012/184, International Monetary Fund.
    4. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64(5), pages 416-416.
    5. Douglas Sutherland & Robert Price & Isabelle Joumard, 2006. "Sub-central government fiscal rules," OECD Economic Studies, OECD Publishing, vol. 2005(2), pages 141-181.
    6. Douglas Sutherland & Peter Hoeller & Rossana Merola, 2012. "Fiscal Consolidation: Part 1. How Much is Needed and How to Reduce Debt to a Prudent Level?," OECD Economics Department Working Papers 932, OECD Publishing.
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    Cited by:

    1. Christl, Michael & Köppl-Turyna, Monika & Kucsera, Dénes, 2018. "Public sector efficiency in Europe: Long-run trends, recent developments and determinants," Working Papers 14, Agenda Austria.
    2. D’Inverno, Giovanna & Vidoli, Francesco & De Witte, Kristof, 2023. "Sustainable budgeting and financial balance: Which lever will you pull?," European Journal of Operational Research, Elsevier, vol. 309(2), pages 857-871.
    3. Venturini, Fiorenza, 2020. "The unintended composition effect of the subnational government fiscal rules: The case of Italian municipalities," European Journal of Political Economy, Elsevier, vol. 63(C).
    4. Fiorenza Venturini, 2018. "The Unintended Composition Effect of the Subnational Government Fiscal Rules: The Case of Italian Municipalities," Working papers 70, Società Italiana di Economia Pubblica.

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    More about this item

    Keywords

    budget systems; fiscal federalism; fiscal rules; fédéralisme budgétaire; règles budgétaires; système budgétaire;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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