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Measuring Fiscal Decentralisation

Concepts and Policies

image of Measuring Fiscal Decentralisation

When trying to measure fiscal decentralisation, the OECD Network on Fiscal Relations Across Government Levels has made significant progress in the last years, especially on tax autonomy of sub-central governments. But in many respects, real-world fiscal decentralisation still escapes the measuring tools, especially when it comes to measure the spending power of sub-central governments or the various regulations attached to intergovernmental grants. This book deals with two interrelated issues. The first concerns  the various measurement of fiscal decentralization in general and their usefulness for policy analysis. The second and more specific issue concerns the taxonomy of intergovernmental grants and the  limits of the current classifications, and how policy changes to the intergovernmental grants framework may require that measurement devices be adapted.

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Measuring decentralisation of public sector activities

Conceptual issues and the case of Germany

This chapter examines conceptual problems related to standard revenue and expenditure measures to assess government decentralisation. While the refinement of the revenue metric as proposed by the OECD comes close to expressing the degree of sub-central tax autonomy, there are still problems to be resolved for assessing tax sharing. Suitable expenditure-oriented decentralisation measures are more difficult to construct. Not only can central mandates or conditions imposed on funding limit the degree of fiscal autonomy of sub-central governments; it is also relevant to evaluate to which extent such constraints are binding for sub-central governments. The problems related to fiscal decentralisation measures are then discussed by looking at the German federal arrangements, which have raised some controversies in the past. Fiscal measures alone may fall short in defining the degree of decentralisation in a country. A more comprehensive approach is needed. The chapter concludes with an outline of a more differentiated composite decentralisation index.

English

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