Fiscal Decentralisation and Regional Development in Transition Countries

This paper lays a foundation by reviewing the issues and the comparative dimensions of fiscal decentralisation in four subject countries - Bulgaria, Hungary, Poland, and Romania. It is divided into the following components. First, it briefly reviews the issues: the main points of the economic literature on the subject and the special challenges to the transition countries in bringing about subsidiarity or devolution. Second, it describes the institutional structures of sub-national government. Then it turns to a three-part review of statistics to compare the relative roles of central and sub-national governmental units in revenue and expenditures in both some EU countries and some transition countries. In Part IV of the paper revenue sources and sharing are examined. Part V examines central grants programs both for their overall roles and in terms of a special feature of the paper - the extent to which central government grants programs are regressive or progressive across a country's subnational units. Part VI then looks at the expenditure side and the extent to which functional programs are decentralised to local governments. The paper is concluded by considerations of the connections between the local public and private sector development, especially in terms of strengthening market agents in the transition.