IDEAS home Printed from
   My bibliography  Save this paper

Frameworks for Central–Local Government Relations and Fiscal Sustainability


  • Morgan, Peter

    (Asian Development Bank Institute)

  • Trinh, Long Q.

    (Asian Development Bank Institute)


Sustainable and inclusive growth in emerging Asian economies requires continued high levels of public sector investment in areas such as infrastructure, education, health, and social services. These responsibilities, especially with regard to infrastructure investment, need to be devolved increasingly to the regional government level. However, growth of sources of revenue and financing for local governments has not necessarily kept pace, forcing them, in some cases, to increase borrowing or cut spending below needed levels. This paper reviews alternative models of the relationship between central and local governments, and provides an overview and assessment of different financing mechanisms for local governments, including tax revenues, central government transfers, bank loans, and bond issuance, with a focus on the context of emerging Asian economies. The paper also reviews financing mechanisms for local governments and mechanisms for maintaining fiscal stability and sustainability at both the central and local government levels. Based upon the evidence on the decentralization process in Asia, it proposes some policy implications for improving central-local government relations and fiscal sustainability.

Suggested Citation

  • Morgan, Peter & Trinh, Long Q., 2016. "Frameworks for Central–Local Government Relations and Fiscal Sustainability," ADBI Working Papers 605, Asian Development Bank Institute.
  • Handle: RePEc:ris:adbiwp:0605

    Download full text from publisher

    File URL:
    File Function: Full text
    Download Restriction: no

    References listed on IDEAS

    1. Robin Boadway & Anwar Shah, 2007. "Intergovernmental Fiscal Transfers : Principles and Practice," World Bank Publications - Books, The World Bank Group, number 7171, December.
    2. Miss Yinqiu Lu & Tao Sun, 2013. "Local Government Financing Platforms in China: A Fortune or Misfortune?," IMF Working Papers 2013/243, International Monetary Fund.
    3. -, 2012. "Decentralization and reform in Latin America: improving intergovernmental relations," Copublicaciones, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 2028 edited by Edward Elgar, September.
    4. Lili Liu, 2010. "Strengthening Subnational Debt Financing and Managing Risks," World Bank Publications - Reports 19471, The World Bank Group.
    5. Jorge Martinez-Vazquez & Cristian Sepulveda, 2012. "Intergovernmental transfers: a policy reform perspective," Chapters, in: Giorgio Brosio & Juan P. Jiménez (ed.), Decentralization and Reform in Latin America, chapter 9, pages iii-iii, Edward Elgar Publishing.
    6. Brian E. Dollery & Joseph Garcea & Edward C. LeSage Jr (ed.), 2008. "Local Government Reform," Books, Edward Elgar Publishing, number 12592, December.
    7. Liu, Lili & Pradelli, Juan, 2012. "Financing infrastructure and monitoring fiscal risks at the subnational level," Policy Research Working Paper Series 6069, The World Bank.
    8. Liu, Lili & Webb, Steven B., 2011. "Laws for fiscal responsibility for subnational discipline : international experience," Policy Research Working Paper Series 5587, The World Bank.
    9. Brian E. Dollery & Lorenzo Robotti (ed.), 2008. "The Theory and Practice of Local Government Reform," Books, Edward Elgar Publishing, number 12719, December.
    10. Jorge Martinez-Vazquez & François Vaillancourt (ed.), 2011. "Decentralization in Developing Countries," Books, Edward Elgar Publishing, number 14175, December.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Li, Tianyu & Du, Tongwei, 2021. "Vertical fiscal imbalance, transfer payments, and fiscal sustainability of local governments in China," International Review of Economics & Finance, Elsevier, vol. 74(C), pages 392-404.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jorge Martinez-Vazquez, 2013. "Fiscal Decentralization in Peru: A Perspective on Recent Developments and Future Challenges," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1324, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    2. David Bartolini, 2015. "Municipal fragmentation and economic performance in OECD TL2 regions," ERSA conference papers ersa15p607, European Regional Science Association.
    3. Brian Dollery & Michael Kortt & Bligh Grant, 2013. "Options for rationalizing local government structure: a policy agenda," Chapters, in: Santiago Lago-Peñas & Jorge Martinez-Vazquez (ed.), The Challenge of Local Government Size, chapter 10, pages 242-262, Edward Elgar Publishing.
    4. Hanes, Niklas, 2003. "Empirical Studies in Local Public Finance: Spillovers, Amalgamations, and Tactical Redistribution," Umeå Economic Studies 604, Umeå University, Department of Economics.
    5. 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.
    6. Benoît Le Maux & Kristýna Dostálová & Fabio Padovano, 2020. "Ideology or voters? A quasi-experimental test of why left-wing governments spend more," Public Choice, Springer, vol. 182(1), pages 17-48, January.
    7. Bernard Dafflon, 2012. "Voluntary amalgamation of local governments: the Swiss debate in the European context," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1204, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    8. Banaszewska, Monika & Bischoff, Ivo & Bode, Eva & Chodakowska, Aneta, 2022. "Does inter-municipal cooperation help improve local economic performance? – Evidence from Poland," Regional Science and Urban Economics, Elsevier, vol. 92(C).
    9. Juan Luis Gómez-Reino & Santiago Lago-Peñas & Jorge Martinez-Vazquez, 2021. "Evidence on economies of scale in local public service provision: a meta-analysis," Working Papers. Collection A: Public economics, governance and decentralization 2103, Universidade de Vigo, GEN - Governance and Economics research Network.
    10. Fabio FIORILLO, 2011. "A model on interests representation and;accountability in small local governments," Working Papers 356, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    11. Jorge Martinez-Vazquez & Richard M. Bird, 2014. "Sustainable development requires a good tax system," Chapters, in: Richard M. Bird & Jorge Martinez-Vazquez (ed.), Taxation and Development: The Weakest Link?, chapter 1, pages 1-24, Edward Elgar Publishing.
    12. Giovanna Di Ielsi & Fabio Fiorillo & Francesco Porcelli, 2022. "Le unioni di comuni in Italia: modelli di gestione associata a confronto (The Italian "unioni di comuni": A comparison among different management models of intermunicipal cooperation)," Moneta e Credito, Economia civile, vol. 75(297), pages 11-40.
    13. Dollery, B.E., 2021. "A critical appraisal of the Western Australian local government review panel’s recommendations," Economic Analysis and Policy, Elsevier, vol. 71(C), pages 434-438.
    14. Juan Luis Gómez-Reino & Jorge Martinez-Vazquez, 2013. "An international perspective on the determinants of local government fragmentation," Chapters, in: Santiago Lago-Peñas & Jorge Martinez-Vazquez (ed.), The Challenge of Local Government Size, chapter 2, pages 8-54, Edward Elgar Publishing.
    15. Mark Callanan & Ronan Murphy & Aodh Quinlivan, 2014. "The Risks of Intuition: Size, Costs and Economies of Scale in Local Government," The Economic and Social Review, Economic and Social Studies, vol. 45(3), pages 371-403.
    16. Rhys Andrews, 2015. "Vertical consolidation and financial sustainability: evidence from English local government," Environment and Planning C, , vol. 33(6), pages 1518-1545, December.
    17. Aurélien Bargain & Christophe Maurel, 2017. "L'instrumentation de gestion au service de la mutualisation de services publics communaux : quels enjeux pour quels effets ?," Post-Print hal-01907611, HAL.
    18. Joseph Drew & Brian Dollery, 2014. "The impact of metropolitan amalgamations in Sydney on municipal financial sustainability," Public Money & Management, Taylor & Francis Journals, vol. 34(4), pages 281-288, July.
    19. Joseph Drew & Brian Dollery, 2014. "Separation anxiety: an empirical evaluation of the Australian Sunshine Coast Regional Council de-amalgamation," Public Money & Management, Taylor & Francis Journals, vol. 34(3), pages 213-220, May.
    20. Anwar Shah, 2014. "Responsibility with accountability: A FAIR governance framework for performance accountability of local governments," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 32(2), pages 343-377.

    More about this item


    Government decentralization; government fiscal balance; intra-government transfers; expenditure assignment; revenue assignment; local government borrowing; mechanisms for fiscal stability;
    All these keywords.

    JEL classification:

    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    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:ris:adbiwp:0605. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: ADB Institute (email available below). General contact details of provider: .

    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.