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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

The OECD fiscal decentralisation database

Fiscal decentralisation is notoriously difficult to measure. The common indicators such as the share of sub-central in general government spending or revenue often provide an imprecise or even misleading picture of intergovernmental fiscal frameworks. Since discretion over the budget is a central aspect of fiscal autonomy, the OECD has developed a more refined set of decentralisation indicators over the last decade. This chapter first presents the indicator on sub-central tax revenue autonomy, followed by the indicators which reflect the restrictions attached to intergovernmental grants. The third section establishes the criteria that should help find the dividing line between tax sharing and intergovernmental grants, two fiscal arrangements that are often difficult to disentangle. For illustrative purposes, results are presented for the year 2005. Finally, the results of a pilot study developing a set of spending power – or spending autonomy – indicators for a few OECD member countries are presented.

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