Vertical fiscal imbalances and fiscal performance in advanced economies

Eyraud, Luc; Lusinyan, Lusine

doi:10.1016/j.jmoneco.2013.04.012

Cited by 135 publications

(111 citation statements)

References 21 publications

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“…First, SNG revenue autonomy might mitigate fiscal indiscipline and indebtedness because it implies greater flexibility in budgetary terms (IMF 2009;Feld and Baskaran 2010;Eyraud and Lusinyan 2013). In the absence of substantial revenue autonomy, managing expenditures is the only instrument available to curb deficit growth.…”

Section: Introductionmentioning

confidence: 99%

Partial fiscal decentralization and sub-national government fiscal discipline: empirical evidence from OECD countries

2015

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Recent theoretical research suggests that financing sub-national governments' expenditure out of own revenue sources is linked to more responsible budgeting, because the financial implications of spending decisions then are internalized within a jurisdiction. We test this proposition empirically on a sample of 23 OECD countries over the 1975-2000 period, and find evidence in line with the hypothesis that greater revenue decentralization (measured as sub-national governments' share of own source tax revenues in general government tax revenue) is associated with improved sub-national government budget deficits/surpluses. This finding is cross-validated with a novel, independent dataset consisting of all 34 OECD member states from 2002 to 2008.

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Section: Introductionmentioning

confidence: 99%

Partial fiscal decentralization and sub-national government fiscal discipline: empirical evidence from OECD countries

2015

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“…Some macroeconomic analysis has addressed somewhat similar questions and could be drawn upon to analyze the impact of soft-budget constraints. For instance, Velasco (2000) has analyzed the related issue of fragmented fiscal policy while Eyraud and Lusinyan (2013) have empirically examined the related issue of the effect of vertical fiscal imbalances on overall budgetary measures. Buettner and Wildasin (2006) as well examine fiscal adjust ment by US municipalities to deficits in a VAR econometric approach, finding substantial future adjustments in expenditure but also in grants.…”

Section: Resultsmentioning

confidence: 99%

Bailouts and Soft Budget Constraints in Decentralized Government: A Synthesis and Survey of an Alternative View of Intergovernmental Grant Policy

Goodspeed¹

2017

HPE-RPE

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This paper selectively surveys the theoretical literature to date on governmental soft budgets where governments are bailing out other governments. The traditional view of intergovernmental grants is that grants can be used by the central government to correct for positive spillover externalities or fis cal equalization. We first we explain how the set-up of the developing "soft budget constraint" view of grant policy differs from the traditional view in fundamental ways. We then use a simple workhorse model of intergovernmental soft budgets under perfect information to examine different motivations for central government bailouts and expand the usual textbook analysis of grants to illustrate the intertem poral distortions under the alternative view of grants. This type of model has been extended in various directions. We examine extensions that include capital taxation, tax competition, forms of equalizing grants, overlapping budget constraints, multiple grant instruments, and the case when public spending is an input to private production. We also briefly review certain papers that examine intergovernmental soft budgets and bailouts when public investment has uncertain returns, a feature of the original models relating to SOEs, and a closely related literature that deals with decentralized leadership and an analogy to Becker's Rotten Kid Theorem. We conclude with some thoughts on directions for future research.

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“…In other cases, decentralizations are politically motivated when societies become disenchanted with centralized policies. In Spain, the strongly centralized system during the Franco regime motivated the creation of the autonomous communities (AC) in the Spanish Constitution of 1978 (Eyraud andLusinyan 2013, IMF 2005).…”

Section: Two Questions About Decentralizationmentioning

confidence: 99%

“…In fact, some degree of fiscal gap on the local level may be efficient, as Eyraud and Lusinyan (2013) argue, because central-local transfers allow the central government to buffer against external shock (e.g. war), to redistribute across regions in response to either ex ante (e.g.…”

Section: Why Does the Devolution Of Revenue Often Lag Behind Spending?mentioning

confidence: 99%

Decentralization and Overborrowing in a Fiscal Federation

Guo

Pei

Xie

2018

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We build an infinite horizon equilibrium model of fiscal federation, where anticipation of transfers from the central government creates incentives for local governments to overborrow. Absent commitment, the central government over-transfers, which distorts the central-local distribution of resources. Applying the model to fiscal decentralization, we find when decentralization widens local governments' fiscal gap, borrowings by both local and central governments rise. Quantitatively, fiscal decentralization accounts for from 19 percent to 40 percent of changes in general government debt in Spain during [1988][1989][1990][1991][1992][1993][1994][1995][1996][1997][1998][1999][2000][2001][2002][2003][2004][2005][2006]. A macroprudential tax on local borrowing that implements Pareto optimal allocation would reduce debt by 27 percent and raise welfare by 3.75 percent.JEL classification: E61, E62, H74

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Vertical fiscal imbalances and fiscal performance in advanced economies

Cited by 135 publications

References 21 publications

Partial fiscal decentralization and sub-national government fiscal discipline: empirical evidence from OECD countries

Partial fiscal decentralization and sub-national government fiscal discipline: empirical evidence from OECD countries

Bailouts and Soft Budget Constraints in Decentralized Government: A Synthesis and Survey of an Alternative View of Intergovernmental Grant Policy

Decentralization and Overborrowing in a Fiscal Federation

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