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The Dynamics of Fiscal Federalism

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  • Garello Pierre

    (Université d’Aix-Marseille III)

Abstract

The contributions presented in this special issue bring to light the complexity of fiscal decentralization and consequently the need for a better understanding of the dynamics of fiscal federalism. This is precisely what that paper attempts to do by first reviewing briefly the standard arguments in favour of decentralization as well as the arguments against it. What is most missing, however, in these standards arguments is a reflection on the dynamics of fiscal federalism and, more generally, on the dynamics of fiscal systems. A large part of the paper is therefore devoted to the identification of the main forces governing such dynamics. A parallel with the market processes helps us to single out features which are shared by both process: the use of local knowledge, the possibility of comparing different products, and more generally, the incentive to discover new paths. Surely, it is more costly to citizens to change the fiscal regime than it is to change goods or services; but precisely, decentralization should reduce these costs hence accelerate the discovery process. Hence, because of the dynamics to which it gives birth, fiscal decentralization appears desirable even if its benefits might arise only after some learning process takes place and even if some fiscal incoherency might prevail during that process.Les contributions présentées dans ce numéro spécial mettent en lumière la complexité de la décent- ralisation du système fiscal et donc la nécessité pour une meilleure compréhension de la dynamique du fédéralisme fiscal. Cest précisément ce que cet article essaie de faire dans un premier temps en passant en revue brièvement les arguments standards en faveur de la décentralisation aussi bien que les arguments opposés. Ce qui manque le plus, cependant, dans ces arguments standards, cest une réflexion sur la dynamique du fédéralisme fiscal et plus généralement sur la dynamique des systèmes fiscaux. Une grande partie de larticle est ainsi consacrée à lidentification des principales forces qui gouvernent une telle dynamique. Un parallèle avec le processus de marché nous aide à établir des modèles partagés par ces processus : lutilisation de la connaissance locale, la possibilité de comparer différents produits et plus généralement, le stimulant de la découverte de nouveaux sentiers. Evidemment, il est plus coûteux pour les citoyens de changer de régime fiscal que de changer de bien ou de service ; mais précisément, la décentralisation devrait réduire ces coûts en accélérant le processus de découverte. Désormais, grâce à la dynamique à laquelle elle donne naissance, la décentralisation fiscale apparaît désirable même si les bénéfices peuvent ne venir quà la suite de processus dapprentissage et même si quelques incohérences fiscales subsistent durant ce processus.

Suggested Citation

  • Garello Pierre, 2003. "The Dynamics of Fiscal Federalism," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 13(4), pages 1-23, December.
  • Handle: RePEc:bpj:jeehcn:v:13:y:2003:i:4:n:1
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    References listed on IDEAS

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    1. Frey, Bruno S. & Eichenberger, Reiner, 1996. "FOCJ: Competitive governments for Europe," International Review of Law and Economics, Elsevier, vol. 16(3), pages 315-327, September.
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    Cited by:

    1. Jean-Michel Josselin & Fabio Padovano & Yvon Rocaboy, 2013. "Grant legislation vs. political factors as determinants of soft budget spending behaviors. Comparison between Italian and French regions," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 10(3), pages 317-354, December.

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