OECD Economics Department Working Papers

ISSN :
1815-1973 (online)
DOI :
10.1787/18151973
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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 Relations across Government Levels You or your institution have access to this content

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Author(s):
Isabelle Joumard1, Per Mathis Kongsrud
Author Affiliations
  • 1: OECD, France

Publication Date
10 Dec 2003
Bibliographic information
No.:
375
Pages
64
DOI
10.1787/455513871742

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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 ...

Keywords:
equalisation, tax assignment, fiscal federalism, fiscal co-ordination
JEL Classification:
  • E62: Macroeconomics and Monetary Economics / Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook / Fiscal Policy
  • H77: Public Economics / State and Local Government; Intergovernmental Relations / Intergovernmental Relations; Federalism; Secession
  • R50: Urban, Rural, Regional, Real Estate, and Transportation Economics / Regional Government Analysis / General