Fiscal decentralization and macroeconomic management
The purpose of this paper is to address a central question in fiscal federalism - whether or not fiscal decentralization implies serious risks for fiscal discipline and macroeconomic management for the nation as a whole. This paper addresses this important issue by drawing upon the existing evidence regarding macro management and fiscal institutions in federal and unitary countries. This is supplemented by cross country regression analysis plus the analysis of two case studies: the Brazilian federation and the unitary regime in China. The main conclusion of the paper is that decentralized fiscal systems offer a greater potential for improved macroeconomic governance than centralized fiscal regimes. This is because the challenges posed by fiscal decentralization are recognized and they shape the design of countervailing institutions in federal countries to overcome adverse incentives associated with incomplete contracts or the “common property” resource management problems or with rent seeking behaviors. Copyright Springer Science + Business Media, LLC 2006
References listed on IDEAS
Please 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.:
- James M. Poterba & Jürgen von Hagen, 1999. "Fiscal Institutions and Fiscal Performance," NBER Books, National Bureau of Economic Research, Inc, number pote99-1.
- Sebastian M. Saiegh & Mariano Tommasi, 1999. "Why is Argentina’s Fiscal Federalism so Inefficient? Entering the Labyrinth," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 169-209, May.
- Cull, Robert & Xu, Lixin Colin, 2003. "Who gets credit? The behavior of bureaucrats and state banks in allocating credit to Chinese state-owned enterprises," Journal of Development Economics, Elsevier, vol. 71(2), pages 533-559, August.
- Jürgen von Hagen, 2002. "Fiscal Rules, Fiscal Institutions, and Fiscal Performance," The Economic and Social Review, Economic and Social Studies, vol. 33(3), pages 263-284.
- Jun Ma, 1995. "Macroeconomic management and intergovernmental relations in China," Policy Research Working Paper Series 1408, The World Bank.
- Robert P. Inman & Daniel L. Rubinfeld, 1991. "Fiscal Federalism in Europe: Lessons From the United States Experience," NBER Working Papers 3941, National Bureau of Economic Research, Inc.
- Beck, Thorsten & Crivelli, Juan Miguel & Summerhill, William, 2005.
"State bank transformation in Brazil - choices and consequences,"
Journal of Banking & Finance,
Elsevier, vol. 29(8-9), pages 2223-2257, August.
- Beck, Thorsten & Crivelli, Juan Miguel & Summerhill, William, 2005. "State bank transformation in Brazil - choices and consequences," Policy Research Working Paper Series 3619, The World Bank.
- Barry Eichengreen & Ricardo Hausmann & Jürgen Von Hagen, 1999. "Reforming Budgetary Institutions in Latin America: The Case for a National Fiscal Council," Open Economies Review, Springer, vol. 10(4), pages 415-442, October.
- Eckaus, R. S., 2003. "Some consequences of fiscal reliance on extrabudgetary revenues in China," China Economic Review, Elsevier, vol. 14(1), pages 72-88.
- William A. Niskanen, 1992. "The Case for a New Fiscal Constitution," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 13-24, Spring.
- Seabright, Paul, 1996.
"Accountability and decentralisation in government: An incomplete contracts model,"
European Economic Review,
Elsevier, vol. 40(1), pages 61-89, January.
- Seabright, Paul, 1994. "Accountability and Decentralization in Government: An Incomplete Contracts Model," CEPR Discussion Papers 889, C.E.P.R. Discussion Papers.
- Shah, Anwar, 1990.
"The new fiscal federalism in Brazil,"
Policy Research Working Paper Series
557, The World Bank.
- Cukierman, Alex & Webb, Steven B & Neyapti, Bilin, 1992. "Measuring the Independence of Central Banks and Its Effect on Policy Outcomes," World Bank Economic Review, World Bank Group, vol. 6(3), pages 353-98, September.
- von Hagen, Jurgen & Eichengreen, Barry, 1996. "Federalism, Fiscal Restraints, and European Monetary Union," American Economic Review, American Economic Association, vol. 86(2), pages 134-38, May.
- Jacques Cremer, 1986. "Cooperation in Ongoing Organizations," The Quarterly Journal of Economics, Oxford University Press, vol. 101(1), pages 33-49.
- Suzanne Kennedy & Janine Robbins, . "The Role of Fiscal Rules in Determining Fiscal Performance," Working Papers-Department of Finance Canada 2001-16, Department of Finance Canada.
- Sheikh, Munir A & Winer, Stanley L, 1977. "Stabilization and Nonfederal Behaviour in an Open Federal State: An Econometric Study of the Fixed Exchange Rate, Canadian Case," Empirical Economics, Springer, vol. 2(3), pages 195-211.
- Ernesto Stein, 1999.
"Fiscal Decentralization and Government Size in Latin America,"
Journal of Applied Economics,
Universidad del CEMA, vol. 0, pages 357-391, November.
- Ernesto H. Stein & Jorge M. Streb, 1998. "Fiscal Decentralization and Government Size in Latin America," IDB Publications (Working Papers) 6436, Inter-American Development Bank.
- Ernesto H. Stein, 1998. "Fiscal Decentralization and Government Size in Latin America," Research Department Publications 4112, Inter-American Development Bank, Research Department.
- Shah, Anwar, 2004. "Fiscal decentralization in developing and transition economies: progress, problems, and the promise," Policy Research Working Paper Series 3282, The World Bank.
- Krug, B. & Zhu, Z. & Hendrischke, H., 2004. "China’s emerging tax regime: Devolution, fiscal federalism, or tax farming?," ERIM Report Series Research in Management ERS-2004-113-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
- Longo, Carlos Alberto, 1994. "Federal problems with VAT in Brazil," Revista Brasileira de Economia, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 48(1), January.
- Inman, Robert P & Fitts, Michael A, 1990. "Political Institutions and Fiscal Policy: Evidence from the U.S. Historical Record," Journal of Law, Economics and Organization, Oxford University Press, vol. 6(0), pages 79-132.
- Oates, Wallace E, 1985. "Searching for Leviathan: An Empirical Study," American Economic Review, American Economic Association, vol. 75(4), pages 748-57, September.
- World Bank, 2002. "Brazil : Issues in Fiscal Federalism," World Bank Other Operational Studies 15417, The World Bank.
When requesting a correction, please mention this item's handle: RePEc:kap:itaxpf:v:13:y:2006:i:4:p:437-462. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If references are entirely missing, you can add them using this form.