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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.

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Sub-central fiscal rules: Making fiscal policy sustainable

Sub-central fiscal rules are constraints that limit sub-central budget autonomy. Well designed fiscal rules can help achieve a sound budgetary position, provide a cushion against adverse shocks, help guard against spending excesses, yet still maintain most of the budget autonomy of sub-central governments. The sub-central fiscal rules framework – as reflected in the OECD sub-central fiscal rules indicator established in 2005 and updated in 2012 – has changed little, which suggests that it was already well established prior to the onset of the economic and fiscal crisis in 2008. This chapter deals with a set of reforms that may help increase the credibility and effectiveness of fiscal rules. While fiscal rules can underpin responsible fiscal behavior, they should be a complement rather than a substitute for well-functioning intergovernmental fiscal institutions.

English

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