Fiscal Decentralisation and Economic Growth in High‐Income OECD Countries

Among the majority of high–income OECD countries, the degree of fiscal decentralisation has converged over the last 30 years towards an intermediate level. The theoretical arguments for and against fiscal decentralisation point to explanations for this tendency, because both extreme decentralisation and extreme centralisation are associated with disadvantages for economic growth. Hence, the observed trend of convergence would be growth–promoting. The paper analyses the long–run empirical relationship between per capita economic growth, capital formation and total factor productivity growth, and fiscal decentralisation for the high–income OECD countries. The evidence supports the view that the relationship is positive when fiscal decentralisation is increasing from low levels, but then reaches a peak and turns negative. A policy implication is that policy–makers in several countries with relatively low degrees of fiscal decentralisation could possibly mobilise growth reserves by increasing it.     

An efficient budget allocation policy for decentralisation of responsibility for site decontamination projects

Selection and execution of site decontamination projects is often best left to local authorities, in accordance with the subsidiarity principle, even though the budget for such projects is made available through a central authority. In this paper we suggest a practical budget allocation policy which a central authority can employ to allocate budgets to local authorities, while still optimising the central authority's environmental objective function. The procedure is fully consistent with the principle of decentralisation of responsibility for selection and execution of projects, and requires a minimum information exchange between local and central levels. Despite the information asymmetry between local and central levels, incentive compatibility problems can be (partially) prevented by choosing an appropriate evaluation mechanism. At the same time, the procedure is computationally effective and efficient, and can guarantee a fair budget allocation, making it easy to implement and politically acceptable.     

A multiregional model of China and its application

China's rapid economic transformation since 1979 has been accompanied by a stark regional disparity with the coastal provinces integrating swiftly into the world markets while inland regions lagging far behind in the industrialisation process. The growth imbalance has placed China's provinces into different stages of development and called for different policy responses to deal with different challenges they are facing. Similarly, a national policy initiated by the central government is likely to be interpreted and implemented in different ways when local governments take into consideration the different conditions in their localities. Therefore, it would be extremely valuable for policy makers and researchers to have an analytical tool that is capable of studying interactions among the provincial economies and the dynamic relationship between the centre and local governments. The multiregional econometric model of China presented in this paper is the first attempt to provide such a tool. The pioneering model consists of over 1200 equations, covering 30 provinces of China that are linked by inter-regional flows of goods and services. The model is used to study the impact of fiscal recentralisation in the 1990s. The counterfactual simulation results show that when China's central government diverted tax revenue from provincial governments, it achieved higher budgetary revenue for the central government but at the expense of lower overall budgetary revenue and slower economic growth.     

Decentralisation and Management Accounting in Central Government: Recycling Old Ideas?

This paper examines the Next Steps development from both contemporaneous and historical perspectives. Specifically, it traces the reliance on a distinct model of management and accounting in Next Steps (1988) and its predecessors (FMI, 1982; and Fulton, 1968). This shows not only that there are a series of commonalities within the details of these various reforms of central government, over the past three decades, but also that these various reforms share foundations which are embedded in 'management thought' on best practice in the 1950s and 1960s. We identify contemporaneous studies in both management and management accounting which could have informed these reforms, and make suggestions for situationally specific means of improving management and accounting in central government.     

Federalism,Fertility, and Growth

This paper analyses the effect of federalism on fertility and growth. In a model with human capital accumulation and endogenous fertility, two regimes of education finance are compared: central and local. I find that local education finance yields higher growth at the price of increased inequality. The effect of federalism on total and differential fertility rates depends on the elasticity of substitution between children and consumption. The paper also empirically examines the relationship between fertility rates and fiscal decentralisation on a panel of OECD countries and finds a weak negative effect of decentralisation on total and differential (poor minus rich) fertility.     

Local municipality productive efficiency and its determinants in South Africa

This paper assesses the technical efficiency of 231 local municipalities in South Africa for 2007 and investigates the potential determinants of efficiency gaps using the non-parametric data envelopment analysis technique. Efficiency scores are explained in a second-stage regression model using a Tobit regression model. To the best of our knowledge, this is the first attempt, using such a technique, to assess technical efficiency at the local government level in the African context. The results show that, on average, B1 and B3 municipalities could have theoretically achieved the same level of basic services with about 16% and 80% fewer resources respectively. Furthermore, fiscal autonomy and the number and skill levels of the top management of a municipality's administration were found to influence the productive efficiency of municipalities in South Africa. Perhaps most importantly, the results depict a bleak picture of the democratic behaviour at the local level in South Africa. It appears that higher income and highly educated households do not feel the incentive to be active participants in public decision-making processes. The paper findings raise concerns over the future of local municipalities in the country, especially about their capability to efficiently deliver expected outcomes on a sustainable basis.     

Municipal Finance in Poland,the Slovak Republic,the Czech Republic and Hungary: Institutional Framework and Recent Development

The recent process of political and economic transition in eastern European countries has not only contributed to the decentralisation of political structure but also significantly enhanced the fiscal autonomy of municipalities in these countries. In this context many similar types of public activities have recently been assigned to local governments, and some taxes were also declared to be local taxes. To be sure, this type of fiscal decentralisation has caused some additional problems, particularly for safeguarding the quality of publicly provided goods and services and for co-ordinating intergovernmental fiscal transfers between the central and local governments. For instance, some criticise that many small-sized municipalities in the transition economies have suffered from financial bottlenecks and have not been able to receive sufficient financial support from the central government. However, such a fiscal devolution trend appears to continue. This study primarily deals with issues surrounding the impact of national fiscal policy and the regulatory framework on local governments' expenditure behaviour and their ability to mobilise necessary revenues under the particular consideration of the institutional and administrative co-operation with the central government and of the less well-developed financial market in Poland, the Slovak Republic, the Czech Republic and Hungary.     

Fiscal Decentralisation and Local Economic Growth: Evidence from a Fiscal Reform in China

This paper uses a fiscal decentralisation reform in China – namely, the province‐managing‐county (PMC) reform – to examine the effects of fiscal decentralisation on local economic growth. The PMC reform abolished the subordinate fiscal relationship between prefectures and counties and transferred much of the tax and spending authority from the prefecture to the county level. Exploiting a county‐level panel data set over 2001–11, we find that the reform has led to a significant increase in the GDP growth rate. The effect is considerably more pronounced in regions with superior initial institutional quality. We also identify channels: the PMC reform induced county governments to exert lower tax burdens on firms and increase spending on infrastructure construction.     

A Comparison of Wage Determination in New South Wales and Queensland (Australian) Clubs

ABSTRACT

Australia's industrial relations framework has undergone substantial change since the 1990s. This has involved federal and state governments attempting to replace the centralised system, based on awards, to a decentralised system based on formalised enterprise and individual bargaining. The move to a decentralised system will supposedly, according to critics of the centralised system, provide significant improvements in flexibility, especially for the hospitality industry. This article examines the results from two studies of registered clubs, one undertakenin New South Wales (NSW)in 1996 and the other in Queensland in 2003, to examine the impact of regulatory changes on wage determination and associated variables in the sector. The findings indicate that despite the rhetoric of proponents of decentralisation, very few clubs have moved from the centralised system to the decentralised one. However, within the centralised system, clubs have undertaken a high level of informal bargaining, both in 1996 and 2003. Despite the level of informal bargaining club managers felt relatively restricted by awards and trade unions.