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Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.
The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.
Fiscal Consolidation Across Government Levels - Part 1. How Much, What Policies?
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- Hansjörg Blöchliger1
- Author Affiliations
- 1: OECD, France
- 28 June 2013
- Bibliographic information
This paper provides an overview of fiscal consolidation efforts at the central and sub-central government level, both during the current and past consolidation episodes. After experiencing a deficit and debt hike during the crisis, sub-central debt is mostly stabilising. So far, sub-central consolidation has been mainly achieved through spending cuts, while overall revenues remained largely stable. Sub-central tax revenues rose a bit, but intergovernmental transfers went down slightly. Sub-central governments in a few countries need to consolidate further, if they want to reach debt levels of 2007 or 2011 by the year 2026, as shown by fiscal gap calculations. During past consolidation episodes, sub-central consolidation increased the probability of debt stabilisation at the general government level. Reductions in intergovernmental grants improved the success rate. Central and sub-central deficits tended to move in parallel, although some subcentral governments experienced a “second trough” three or four years after consolidation had started. The paper suggests a number of instruments that could help sub-central governments consolidate their budgets, and argues in favour of amendments to sub-central fiscal rules.
- sub-national debt, sub-national fiscal policy, fiscal consolidation at sub-national level, fiscal federalism
- JEL Classification:
- E65: Macroeconomics and Monetary Economics / Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook / Studies of Particular Policy Episodes
- H60: Public Economics / National Budget, Deficit, and Debt / General
- H77: Public Economics / State and Local Government ; Intergovernmental Relations / Intergovernmental Relations ; Federalism ; Secession