OECD Regional Development Working Papers
- Discontinued
- Is continued by :
- OECD Regional Development Papers
Working papers from the Regional Development Policy Division of the OECD cover a full range of topics including regional statistics and analysis, urban governance and economics, rural governance and economics, and multi-level governance. Depending on the programme of work, the papers can cover specific topics such as regional innovation and networks, the determinants of regional growth or fiscal consolidation at the sub-national level.
- ISSN: 20737009 (online)
- https://doi.org/10.1787/20737009
Passing the Buck? Central and Sub-national Governments in Times of Fiscal Stress
The paper explores interrelations between the fiscal situation of sub-national and central
governments, or – put differently – whether and how sub-national and central governments contribute
to each other’s fiscal difficulties. The first part of the paper examines sub-national government
policies that may negatively affect the fiscal situation of the central government. Based on a new
cross-country data-set at the level of individual regions, it examines structural factors that increase
the probability of sub-national entities accumulating amounts of debt that may ultimately turn out to
be unsustainable. The underlying idea is to explore to what degree such debt levels could result from
moral hazard-driven behaviour at the regional level. The second part of the paper examines whether
and how national governments hand the burden of fiscal adjustment down to sub-national levels,
mainly looking at examples from the wave of fiscal adjustments in the wake of the 2007-09 global
financial crisis.
Keywords: fiscal stress, public debt, bailouts, sub-national government
JEL:
H81: Public Economics / Miscellaneous Issues / Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts;
H74: Public Economics / State and Local Government; Intergovernmental Relations / State and Local Borrowing;
H70: Public Economics / State and Local Government; Intergovernmental Relations / State and Local Government; Intergovernmental Relations: General;
H12: Public Economics / Structure and Scope of Government / Crisis Management
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