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Fiscal Relations across Government Levels

  • Isabelle Joumard
  • Per Mathis Kongsrud

Despite its apparent advantages, devolution of fiscal responsibilities has not proceeded evenly over the past two decades. Decentralisation can strengthen the democratic process, allow governments to tailor the supply of public goods to local preferences and introduce some competition across jurisdictions, thus raising public sector efficiency. It can, however, entail efficiency losses, and make it difficult to implement redistributive policies and complicate macroeconomic management. On the spending side, local provision may fail to exploit economies of scale and internalise territorial spillovers -- a serious issue since few public goods are purely local by nature. On the revenue side, few tax bases can be exploited by subnational governments without risking making national objectives difficult to achieve and raising serious distributive concerns. This paper, which is largely based on country experiences in mitigating the potential drawbacks of decentralisation while obtaining ... Cet article décrit les principaux défis posés par le fédéralisme budgétaire et approches pour y remédier Le transfert de compétences budgétaires aux collectivités territoriales n’a pas toujours procédé de façon linéaire au cours des deux dernières décennies, malgré certains avantages reconnus. La décentralisation peut contribuer au renforcement du processus démocratique, permettre aux collectivités territoriales d’adapter l’offre de services publics aux préférences locales et introduire de la concurrence entre localités, permettant ainsi d’améliorer l’efficience du secteur public. La décentralisation peut néanmoins générer des pertes d’efficacité, rendre difficile la mise en place de politiques redistributives et compliquer la mise en œuvre de politiques macro-économiques cohérentes. Du côté des dépenses, la décentralisation peut être sous-optimale dès lors que sont important les économies d’échelle et les effets de "spillover" géographique –- effets fréquents car peu de biens publics sont des biens purement locaux par nature. Du côté des revenus, rares sont les assiettes fiscales qui ...

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Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 375.

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Date of creation: 10 Dec 2003
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Handle: RePEc:oec:ecoaaa:375-en
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