The impact of fiscal decentralization on growth, inflation and inequality in the Americas

Bojanic, Antonio N.

doi:10.18356/31c71be8-en

Cited by 27 publications

(20 citation statements)

References 32 publications

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“…Switzerland's historically grown internal economic complexity, its decentralized system of governance and its high rates of migration may have crucially contributed to its global economic competitiveness as well as its good performance in social and environmental terms. Even though recent empirical research on the impact of decentralized political systems on social inequality has shown rather mixed results in countries such as the USA [32], the Americas [33] and China [34], the degree of social inequality in the federal system of Switzerland remains comparatively low [22]. However, since Switzerland has not changed its federal system in any substantial form since its foundation in 1848, and its economy was less affected by the two World Wars than in the rest of Europe, it is difficult to investigate how social equality would have fared under different circumstances.…”

Section: Economic Complexity and Migration In Switzerlandmentioning

confidence: 99%

Decentralized Economic Complexity in Switzerland and Its Contribution to Inclusive and Sustainable Change

Aerni

2021

Sustainability

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The UN Sustainable Development Goals (SDGs) aim at harnessing economic complexity for sustainable and inclusive economic growth by calling for a decade of joint action. In this paper, we show how the action-oriented collaborative culture of complex and competitive economic ecosystems in places outside the major population centers may generate significant positive external effects for society and the environment at large. We illustrate this by means of two small case studies in Switzerland, a country with a federal system that enables decentralized economic development. The first case study investigates the economic ecosystem of the small town Monthey to show how productive migrants and embedded multinational companies increase the knowledge and know-how of local small and medium-sized enterprises (SMEs). The successful collaboration of insiders and outsiders accounts for the internal economic complexity that makes the region innovative and competitive. The second case study highlights the importance of the federalist system by showing how the canton of Solothurn succeeded in nurturing globally competitive export-oriented SMEs. We conclude that the success of these inclusive economic ecosystems in unexpected places may only be understood in the specific geographical, historical and political context, as well as the general openness of these regions toward entrepreneurial migrants and global business. The importance of local social capital makes it hard to replicate such success stories. Nevertheless, they indicate that the global knowledge economy may not just pose a threat, but also offer great opportunities for productive regions beyond the major global high-tech clusters of economic complexity.

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Section: Economic Complexity and Migration In Switzerlandmentioning

confidence: 99%

Decentralized Economic Complexity in Switzerland and Its Contribution to Inclusive and Sustainable Change

Aerni

2021

Sustainability

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“…In this sense, we should bear in mind that one of the most reliable reasons for having yet inconclusive empirical evidence is because researchers rely mostly on the data provided by the GFS of the IMF on revenue and expenditure decentralization but we are aware of the fact that such data do not always give us the actual degree of fiscal autonomy reached by the subnational governments (Bojanic, 2018;Ebel & Yilmaz, 2002;Martinez-Vazquez et al, 2016;Stegarescu, 2005). This is so because, theoretically, tax sharing and other tax decentralization formulas do not provide real tax autonomy (Lago-Peñas et al, 2017).…”

Section: Revenue and Expenditure Decentralizationmentioning

confidence: 99%

“…Despite Rodden (2004) complains regarding the standard formula to measure fiscal decentralization by the shares of subnational revenues and/or subnational expenditure to general government, most recent research, even for OECD countries (Bojanic, 2018;Makreshanska-Mladenovska & Petrevski, 2019), keep relying on the shares of subnational governments revenue/expenditure to general government revenue/expenditure. In this article, for our data set of developing federations, such sophisticated decentralization indicators were not possible to have access to and we rely on two measures of fiscal decentralization based on the IMF data, as explained in section "Data and Method.…”

Section: Revenue and Expenditure Decentralizationmentioning

confidence: 99%

Economic Growth by Means of Fiscal Decentralization: An Empirical Study for Federal Developing Countries

2020

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The impact of fiscal federalism on economic performance has largely been studied in the developed world since the seminal work of Oates. In this article, we focus on a particular set of developing countries considered to be federal (Forum of Federations), to examine how fiscal decentralization has impacted their economic growth. In this context, we study the impact of tax revenue and expenditure decentralization on economic growth in developing federations. For this purpose, a panel data of 15 developing federations from 2000 to 2015 are analyzed by using a two-step system Generalized Method of Moments (GMM) estimation method. The results show that in federal developing countries, both tax revenue and expenditure decentralization have a significant, positive impact on economic growth. What is more, our findings show that the impact of fiscal decentralization on economic growth depends upon the level of perceived corruption and on the quality of the country’s institutions. Thus, empirical evidence depicts that the positive effect of fiscal decentralization on economic growth is tempered if the country is plagued with corruption, if it has weak institutions, and/or if it suffers from political instability. By contrast, a relatively corruption-free country featuring healthy institutions and a stable political environment could take fuller advantage of the effects of fiscal decentralization to improve economic growth.

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“…According to [23], three main themes from the viewpoint of fiscal decentralization have been explored in the economics literature. The first concerns how governance is affected by the transfer of revenue and spending powers to regional institutions [24].…”

Section: Definition Of Fiscal Decentralizationmentioning

confidence: 99%

Dynamics of Local Government Finance in Cameroon: An Assessment of Local Councils in the Fako Division

Takwa

Babila

Teno

2020

AJEBA

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Local councils in every part of Cameroon are playing an extremely significant role in the provision of essential public services. However, the local development authorities face tremendous challenges to adequately generate finances to meet community needs. The aim of this paper is to find out whether the councils in the Fako Division have access to all the sources of finance as stipulated by statute and to determine the difficulties they face in exploiting the sources to finance their developmental plans. The exploratory and descriptive designs were adopted for the study. 4 out of the 6 councils in the Fako Division were conveniently selected. The Finance and General Affaires Officers were purposely designated as the respondents for the study. Data were collected with the aid of semi-structured questionnaires and a checklist. The collected data were descriptively analysed with the use of tables and bar charts. Mean and the Relative Important index were used to rank in terms of importance the challenges faced by the councils in the revenue generation process and the options available to them to exploit. The findings reveal that the councils have access to internal sources such as; local taxes; fees, fines, and penalties; service charges, patents and business licenses; Gifts and donations. The external sources were mostly Intergovernmental transfers and Council Development Funds from FEICOM and PNDP. The study equally found out that the most exploited options of finance by the councils are INTERCOM (M =4.25, RII = 0.85, ranked 1st) and service charge adjustment (M = 4.13, RII = 0.82, ranked 2nd) while the least utilized options were tax adjustment (Mean = 1.00, RII = 0.02, ranked 10th) and the usage of saved up profit from investments and businesses (M = 1.75, RII = 0.35, ranked 9th). The study further uncovered that the challenges with the highest mean scores are infringement by the central government on means of internal revenue generation of the municipality (M = 3.85, SD = 1.214) and lack of power to make finance bi laws (M = 3.85, SD = 1.214), while inadequate sources of revenue (M = 3.42, SD = 1.306) and narrow local tax base (M = 3.42, SD = 1.306) had the least mean scores. The study recommends among others that the framework in place needs clarification to clear off conflicting and confusing goals. It should include legislative clarification of the responsibilities of each level of government and the identification of the appropriate funding resources. These will reduce vertical imbalances and increase fiscal responsibility. Also, a transfer system should be defined that encourages local governments to collect own revenue and manage their roles efficiently, while imposing strict budget constraints to foster fiscal discipline. This will minimize conflicting responsibilities and enable the local governments to discharge their functions.

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The impact of fiscal decentralization on growth, inflation and inequality in the Americas

Cited by 27 publications

References 32 publications

Decentralized Economic Complexity in Switzerland and Its Contribution to Inclusive and Sustainable Change

Decentralized Economic Complexity in Switzerland and Its Contribution to Inclusive and Sustainable Change

Economic Growth by Means of Fiscal Decentralization: An Empirical Study for Federal Developing Countries

Dynamics of Local Government Finance in Cameroon: An Assessment of Local Councils in the Fako Division

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