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Fiscal responsibility laws for subnational discipline : the Latin American experience

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  • Webb, Steven B.

Abstract

This paper discusses fiscal responsibility laws in Latin America, with special attention to their provisions for fiscal discipline by subnational governments. It discusses why and when such laws might be useful-to help resolve the coordination problem in getting diverse governments to avoid overusing the common national credit market and to help individual governments make a time-consistent commitment for fiscal prudence. It examines the cases of Brazil, Colombia, Peru, and Argentina, as well as the case of Mexico where other types of laws and regulations aim to achieve the same objectives of solidifying incentives for fiscal discipline at all levels of government. Fiscal responsibility laws are found to be useful in some cases, although the experience is not long enough to be certain, but they are clearly not necessary in every case, nor always sufficient to assure fiscal stability.

Suggested Citation

  • Webb, Steven B., 2004. "Fiscal responsibility laws for subnational discipline : the Latin American experience," Policy Research Working Paper Series 3309, The World Bank.
    • Handle: RePEc:wbk:wbrwps:3309
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    References listed on IDEAS

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    1. Dillinger,William R. & Webb,Steven Benjamin, 1999. "Fiscal management in federal democracies : Argentina and Brazil," Policy Research Working Paper Series 2121, The World Bank.
    2. Juan José Echavarría Soto & Carolina Rentería & Roberto Steiner, 2000. "Decentralization and Bailouts in Colombia," Informes de Investigación 2252, Fedesarrollo.
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    8. William Dillinger & Steven B. Webb, 1999. "Fiscal management in federal democracies: Argentina and Brazil," Económica, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata, vol. 0(3), pages 423-483.
    9. Henning Bohn & Robert P. Inman, "undated". "Balanced Budget Rules and Public Deficits: Evidence from the U.S. States (Reprint 060)," Rodney L. White Center for Financial Research Working Papers 10-96, Wharton School Rodney L. White Center for Financial Research.
    10. William Dillinger & Steven B. Webb, 1999. "Fiscal management in federal democracies: Argentina and Brazil," Económica, Instituto de Investigaciones Económicas, Facultad de Ciencias Económicas, Universidad Nacional de La Plata, vol. 0(3), pages 423-483.
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    Cited by:

    1. Mr. Ananthakrishnan Prasad & Mr. Adarsh Kishore, 2007. "Indian Subnational Finances: Recent Performance," IMF Working Papers 2007/205, International Monetary Fund.
    2. Jorge Martinez-Vazquez & Violeta Vulovic, 2017. "How well do subnational borrowing regulations work?," Chapters, in: Naoyuki Yoshino & Peter J. Morgan (ed.), Central and Local Government Relations in Asia, chapter 5, pages 161-220, Edward Elgar Publishing.
    3. Lili Liu, 2009. "Turkey," World Bank Publications - Reports 26063, The World Bank Group.
    4. Alston, Lee J. & Melo, Marcus André & Mueller, Bernardo & Pereira, Carlos, 2006. "Political Institutions, Policymaking Processes and Policy Outcomes in Brazil," IDB Publications (Working Papers) 3365, Inter-American Development Bank.
    5. Agustín Molina†Parra & Diego Martínez†López, 2018. "Do Federal Deficits Motivate Regional Fiscal (Im)Balances? Evidence For The Spanish Case," Journal of Regional Science, Wiley Blackwell, vol. 58(1), pages 224-258, January.
    6. World Bank, 2008. "Brazil : Toward a More Inclusive and Effective Participatory Budget in Porto Alegre, Volume 1. Main Report," World Bank Publications - Reports 8042, The World Bank Group.
    7. José Roberto Rodrigues Afonso & Erika Amorim Araújo & Geraldo Biasoto Júnior, 2015. "Fiscal Space and Public Sector Investments in Infrastructure: a Brazilian Case-Study," Discussion Papers 0161, Instituto de Pesquisa Econômica Aplicada - IPEA.
    8. Carlos Scartascini & Ernesto H. Stein & Emmanuel Abuelafia & Sergio Berensztein & Miguel Braun & Luciano Di Gresia & Lee J. Alston & Marcus André Melo & Bernardo Mueller & Carlos Pereira & Mauricio Cá, 2009. "Who Decides the Budget? A Political Economy Analysis of the Budget Process in Latin America," IDB Publications (Books), Inter-American Development Bank, number 87294 edited by Mark Hallerberg & Carlos Scartascini & Ernesto H. Stein, February.
    9. José Roberto Rodrigues Afonso & Erika Amorim Araújo & Geraldo Biasoto Júnior, 2005. "Fiscal Space and Public Sector Investments in Infrastructure: A Brazilian Case-Study," Discussion Papers 1141, Instituto de Pesquisa Econômica Aplicada - IPEA.
    10. Carlos Scartascini & Pablo T. Spiller & Ernesto H. Stein & Mariano Tommasi & Lee J. Alston & Marcus André Melo & Bernardo Mueller & Carlos Pereira & Cristóbal Aninat & John Londregan & Patricio Navia , 2011. "El juego político en América Latina: ¿Cómo se deciden las políticas públicas?," IDB Publications (Books), Inter-American Development Bank, number 42118 edited by Carlos Scartascini & Pablo T. Spiller & Ernesto H. Stein & Mariano Tommasi, February.
    11. Jonas Frank, 2010. "Towards a Fiscal Pact : The Political Economy of Decentralization in Bolivia," World Bank Publications - Reports 12737, The World Bank Group.
    12. John Thornton, 2009. "Do fiscal responsibility laws matter? Evidence from emerging market economies suggests not," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 12(2), pages 127-132.
    13. Yener Altunbaş & John Thornton, 2017. "Why Do Countries Adopt Fiscal Rules?," Manchester School, University of Manchester, vol. 85(1), pages 65-87, January.
    14. World Bank, 2008. "Brazil - Toward a More Inclusive and Effective Participatory Budget in Porto Alegre : Volume 1. Main report," World Bank Publications - Reports 6275, The World Bank Group.
    15. John Thornton & Chrysovalantis Vasilakis, 2020. "Do fiscal rules reduce government borrowing costs in developing countries?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 25(4), pages 499-510, October.
    16. Roy Bahl & Eunice Heredia-Ortiz & Jorge Martinez-Vazquez & Mark Rider, 2005. "India: Fiscal Condition of the States, International Experience,and Options for Reform: Volume 1 (2005)," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper05141, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    17. Liu, Lili & Waibel, Michael, 2010. "Managing subnational credit and default risks," Policy Research Working Paper Series 5362, The World Bank.
    18. Ian Lienert, 2013. "Fiscal Responsibility Laws: Are They Needed?," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 4(03), pages 1-32.
    19. Roy Bahl & Eunice Heredia-Ortiz & Jorge Martinez-Vazquez & Mark Rider, 2005. "India: Fiscal Condition of the States, International Experience,and Options for Reform: Volume 2 (2005)," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper05142, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    20. Scartascini, Carlos & Spiller, Pablo T. & Stein, Ernesto H. & Tommasi, Mariano & Alston, Lee J. & Melo, Marcus André & Mueller, Bernardo & Pereira, Carlos & Aninat, Cristóbal & Londregan, John & Navia, 2011. "El juego político en América Latina: ¿Cómo se deciden las políticas públicas?," IDB Publications (Books), Inter-American Development Bank, number 332.

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