IDEAS home Printed from https://ideas.repec.org/a/akh/journl/591.html

The Long and Winding Road Towards Fiscal Decentralization

Author

Listed:
  • María Laura Alzúa

    (Centro de Estudios Distributivos, Laborales y Sociales, Facultad de Ciencias Económicas, Universidad Nacional de La Plata. CONICET)

  • Carolina López

    (Centro de Estudios Distributivos, Laborales y Sociales, Facultad de Ciencias Económicas, Universidad Nacional de La Plata. CONICET)

Abstract

This paper offers a theoretical explanation of the difficulties embodied in a process of fiscal decentralization from national to sub-national governments, as it is empirically observed in numerous developing countries. A game theoretic framework is used to show that the central government's lack of a credible commitment technology, used to penalize sub-national governments' fiscal profligacy, may give rise to an incomplete level of fiscal decentralization. Two different sets of equilibria are obtained. In one of them the central government will confer complete taxing autonomy to the sub-national governments, while in the other the government maintains the taxing authority since it is optimal to do so. In this case, the economy falls in an inefficient level of fiscal decentralization, as measured in terms of revenue collection.

Suggested Citation

  • María Laura Alzúa & Carolina López, 2014. "The Long and Winding Road Towards Fiscal Decentralization," Económica, Instituto de Investigaciones Económicas, Facultad de Ciencias Económicas, Universidad Nacional de La Plata, vol. 60, pages 3-43, January-D.
    • Handle: RePEc:akh:journl:591
    as

    Download full text from publisher

    File URL: https://revistas.unlp.edu.ar/Economica/article/view/5347/4377
    Download Restriction: no
    ---><---

    Other versions of this item:

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:akh:journl:591. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Laura Carella (email available below). General contact details of provider: https://edirc.repec.org/data/funlpar.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.