OECD Working Papers on Fiscal Federalism

This series covers issues related to intergovernmental fiscal relations and local/regional public finance, such as: tax and spending assignment across government levels; intergovernmental grants; fiscal equalization; local and regional public service efficiency; inter-jurisdictional tax competition; and macroeconomic issues such as intergovernmental fiscal management and sub-central fiscal rules. Many of these working papers are outputs of the OECD Network on Fiscal Relations Across Levels of Government. Related working papers on fiscal federalism issues are also published in other OECD working paper series on tax policy, economics, public governance and regional development. An integrated list of key papers produced by the Fiscal Network can be found at http://oe.cd/fiscalnetwork.

(Note: numbers 1, 6 and 8 are available in the OECD Economics Department Working Papers, as numbers 465, 626 and 705.)


Insolvency Frameworks for Sub-national Governments

Sub-national insolvency frameworks stipulate rules and procedures to resolve sub-national debt in a prompt and orderly way. As such they may serve to facilitate debt restructuring and the fiscal recovery of sub-national entities. They may even prevent sub-national governments from sliding into insolvency. This paper identifies the benefits of setting up an insolvency framework for sub-national governments complementing existing budget rules and procedures. It analyses different design options of sub-national insolvency frameworks by drawing on existing regimes for municipalities in Colombia, Hungary, South Africa, Switzerland and the United States as well as proposals for sovereign bankruptcy procedures in the literature. The paper also explores the main challenges for implementing sub-national insolvency regimes and presents possible solutions.


Keywords: municipal bankruptcy, sub-national insolvency, debt resolution frameworks
JEL: K3: Law and Economics / Other Substantive Areas of Law; H7: Public Economics / State and Local Government; Intergovernmental Relations
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