OECD Fiscal Federalism Studies

2225-4056 (online)
2225-403X (print)
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The OECD Fiscal Federalism Series presents policy analysis of, and statistics about, intergovernmental fiscal relations and state/regional and local public finance. It draws on the work of the OECD Network on Fiscal Relations across Government Levels and of other OECD bodies covering these areas.

Institutional and Financial Relations across Levels of Government

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23 Feb 2012
9789264167001 (PDF) ;9789264166899(print)

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As financial markets put more and more pressure on governments to reduce their deficits and debts, sub-central  levels of government are a key player in the implementation of national strategies. The room for manoeuvre to implement consolidations strategies coordinated across levels of government highly depends on the institutional structure of intergovernmental relations, and the effectiveness of their multi-level governance structure. This was already the case for recovery strategies, in the beginning of the crisis. This report provides an overview of the institutional and financial relations across levels of government  that enables policymakers evaluate their position and identify good practices for mobilizing sub-central governments for national growth, equity and stability objectives. This report is divided into two parts: the first part is analytical and the second part provides institutional and quantitative country information and comparisons.

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  • Foreword and Acknowledgements
    The few years since the beginning of the worst economic crisis in decades have been particularly challenging for policy makers, both at central and sub-central levels of administration. As financial markets are putting pressure on governments to reduce their deficits and debts, sub-central governments (SCGs) have once again become key players in implementing national policies as they are responsible for 16% of public debt and 16.6% of public deficits on average in OECD member countries. How much leeway there is for co-ordinating consolidation strategies across levels of government depends on the institutional structure of intergovernmental relations and the effectiveness of the multi-level governance structure, which are the object of this volume.
  • Introduction
    The recent crisis and its aftermath has increased the demand for more effective public governance and highlighted the importance of the institutional and financial frameworks to design public governance schemes. In such a context, improving public governance is important to secure a fair and sustainable public service delivery and endogenous development in all regions.
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  • Expand / Collapse Hide / Show all Abstracts Managing institutional and financial relations across levels of government in times of economic and financial turmoil

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    • A sub-central government perspective on fiscal policy in a tight fiscal environment
      This chapter assesses the impact of the global financial crisis on sub-central governments’ finances and describes how the relationship between central and sub-central governments has evolved, from a strong support during the crisis, to requesting their efforts in the present phase of consolidation. The first section shows that the crisis and stimulus measures have increased the levels of sub-central government debts and exacerbated the disparities between strong and weak sub-central governments. The financial markets are now putting pressure both on central governments and on sub-central governments to reduce their levels of debt. The second section shows that a credible commitment on the part of sub-central governments is necessary to achieve fiscal consolidation and describes the measures being taken to achieve this. The third section explores the need for all levels of government to make the most of reduced public investment in a tight national fiscal context and presents some guiding principles how to do better with less.
    • The political economy of fiscal decentralisation
      In the present tight fiscal environment, many countries may seek to reform their fiscal relations across levels of government to try to find efficiency gains. Although fiscal federalism reforms are meant to make intergovernmental fiscal relations more efficient, more equitable and more stable, experience shows that they usually face stiff political resistance. Little analysis has been done so far on the political economy of fiscal federalism and local government reforms. The present chapter summarises the main conclusions of the study carried out by the OECD Network on Fiscal Relations across Levels of Government. The first section analyses why governments undertake fiscal federalism reforms, and the methodology used in the study. The second section focuses on the context for the reform, i.e. on the factors that shape and influence reforms and reform processes, but that lie largely beyond the control of policy makers, such as the general economic situation or electoral mandates. The third section discusses the issues of the timing and scope of the reforms, and in particular, underlines the importance of bundling several reforms together. The last section deals with the design of the reform process.
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  • Expand / Collapse Hide / Show all Abstracts Institutional and financial relations across levels of government: information on countries

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    • Financial resources, expenditures and debt of sub-central governments
      The design of intergovernmental fiscal relations varies widely across countries, as they necessarily incorporate local economic, but also political, social and cultural factors. This chapter aims to give some insight to policy makers about the relative importance in OECD member countries of sub-central governments (SCGs) in different policy fields, the spending responsibilities of sub-central governments, and the composition and autonomy of the revenues of sub-central governments with which they must finance these expenditures. This chapter draws on data from the OECD Fiscal Decentralisation Database, a new database developed by the OECD Network on Fiscal Relations across Levels of Government, based on information provided by the OECD National Accounts and OECD Revenue Statistics. The first section focuses on the spending responsibilities and weight of sub-central governments. The second section analyses sub-central governments’ own revenues, such as taxes and user fees. The third section looks at the grants in sub-central governments’ revenues and, finally, the fourth section deals with sub-central government debt.
    • Country notes
      The present chapter presents a synthesis of fiscal federalism in eight OECD member countries (Finland, France, Italy, Korea, Portugal, Spain, Sweden, and the United Kingdom). In each country note, the first section describes the institutional framework (description of the different levels of government, responsibilities of sub-central governments), the second section provides the key figures in fiscal relations across levels of government, and the third section gives a synthesis of recent and current fiscal federalism reforms.
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