Fiscal Federalism 2014

Making Decentralisation Work

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This book offers an overview on recent trends and policies in intergovernmental fiscal relations and sub-central government. Accessible chapters provide: insight into how sub-central governments are managing ongoing consolidation, as well as how fiscal decentralisation fosters economic growth and educational attainment; a balanced account of the virtues and limits of tax competition between jurisdictions; an overview of fiscal equalisation policy; and some fascinating background information about past tax and public service reforms.



Fiscal consolidation across levels of government

This chapter deals with the consolidation of public finances across levels of government in the aftermath of the 2008-09 crisis. It reviews the pace of consolidation in response to widening deficits and rising debt, then assesses whether consolidation at the sub-central level has been achieved by spending cuts rather than an increase in own tax revenue and intergovernmental transfers. It analyses additional sub-central consolidation needs under various scenarios. Overall, sub-central governments’ finances are in fairly good shape in most OECD countries, but considerable efforts are still needed to restore debt to pre-crisis levels in some jurisdictions. The chapter goes on to look at past large-scale consolidation episodes in order to gauge how governments – both central and sub-central – have succeeded in consolidating after economic and fiscal crises. Finally, it surveys policy instruments that could help achieve consolidation while spurring economic activity.



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