Measuring Fiscal Decentralisation: An Entropic Approach
Abstract
Fiscal decentralisation has attracted attention from government, academic studies, and international institutions with the aims of enhancing economic growth in recent years. One of the difficult issues is to measure satisfactorily the degree of fiscal decentralisation across countries. This study helps resolve the problem by developing the fiscal decentralisation index which accounts for both fiscal autonomy and fiscal importance of subnational governments. While the index is an advance on current practice, it is still not perfect as it assumes there is no dispersion of revenue and expenditure across regions. In response to this weakness, fiscal entropy and fiscal inequality measures are developed using information theory (Theil, 1967). It is shown how fiscal inequality can be decomposed regionally and hierarchically. These ideas are illustrated with Australia data pertaining to federal, state and local levels of governments.Download Info
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Paper provided by The University of Western Australia, Department of Economics in its series Economics Discussion / Working Papers with number 06-28.Length: 38 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:uwa:wpaper:06-28
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Related research
Keywords: Fiscal Decentralisation; Fiscal Autonomy; Fiscal Importance; Australia;Find related papers by JEL classification:
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-05-12 (All new papers)
- NEP-CBA-2007-05-12 (Central Banking)
- NEP-PBE-2007-05-12 (Public Economics)
- NEP-URE-2007-05-12 (Urban & Real Estate Economics)
References
References listed on IDEASPlease report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hamid Davoodi & Heng-fu Zou, 1996.
"Fiscal Decentralization and Economic Growth: A Cross-Country Study,"
CEMA Working Papers
98, China Economics and Management Academy, Central University of Finance and Economics.
- Davoodi, Hamid & Zou, Heng-fu, 1998. "Fiscal Decentralization and Economic Growth: A Cross-Country Study," Journal of Urban Economics, Elsevier, vol. 43(2), pages 244-257, March.
- Charles E. McLure, Jr. & Jorge Martinez-Vazquez, 1998. "Intergovernmental Fiscal Relations in Vietnam," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper9802, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
- Bird, Richard M. & Smart, Michael, 2002. "Intergovernmental Fiscal Transfers: International Lessons for Developing Countries," World Development, Elsevier, vol. 30(6), pages 899-912, June.
- Gary Woller & Kerk Phillips, 1998. "Fiscal decentralisation and IDC economic growth: An empirical investigation," The Journal of Development Studies, Taylor and Francis Journals, vol. 34(4), pages 139-148.
- Duc Hong Vo, 2005. "Fiscal Decentralisation in Vietnam: a Preliminary Investigation," Economics Discussion / Working Papers 05-16, The University of Western Australia, Department of Economics.
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