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.


On grant policy and the OECD-taxonomy of grants

The chapter addresses two issues. One is to explain why earmarking, so much criticised, still is so much used. The second is to examine whether international grant statistics compare the degrees of local autonomy in a correct way. The distinction between earmarked and non-earmarked grants is the basic feature of the OECD classification of grants. The drivers of earmarking are listed. Among these are the desire of the centre to implement merit wants, and the demand for precise compensation for the costs of new local competences. Next a number of problems in the OECD classification of grants is described. Among these are the unclear treatment of tax sharing revenues, the negative correlation between earmarking and regulation, the need for a grey zone between earmarking and non-earmarking, and the – in some cases large – grants for agent functions. The chapter ends with a summary of issues for improvements of the OECD statistics.


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