Managing Fiscal Decentralization (Routledge Studies in the Modern World Economy, 36)

401 Pages·2002·1.39 MB·English

by  Ehtisham Ahmad

Managing Fiscal
Decentralization
The growth of interest in fiscal decentralization has meant that there has been something
of a rush to enshrine this in policy and implementation of reforms.Some 70 countries
see this as a major part of their development strategy.This book critically examinesthe
case for decentralization.
This collection of contributions comes from a world-wide team of experts,including
academics such as Albert Breton, Giorgio Brosio and Govinda Rao, as well as senior
officials of countries that have undertaken decentralization reforms,and staff from the
IMF and the World Bank. After analyzing fiscal decentralization in general, the book
goes on to look at intriguing case studies of various regions around the world including:
(cid:2) the European Union
(cid:2) Hungary and Slovakia
(cid:2) Russia and China
(cid:2) India and Indonesia
(cid:2) Brazil and Argentina
(cid:2) the African context,with emphasis on South Africa.
This comprehensive and authoritative guide to fiscal decentralization will be of great
interest to academics,researchers and of course policy makers.
Ehtisham Ahmadis with the International Monetary Fund.
Vito Tanzi was with the IMF and is now State Secretary of the Italian Ministry of
Finance.
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Don Lavoie and Emily Chamlee-Wright Edited by Ehtisham Ahmad and Vito Tanzi

Managing Fiscal
Decentralization
Edited by
Ehtisham Ahmad
and Vito Tanzi
London and New York
First published 2002
by Routledge
11 New Fetter Lane,London EC4P 4EE
Simultaneously published in the USA and Canada
by Routledge
29 West 35th Street,New York,NY 10001
Routledge is an imprint of the Taylor & Francis Group
This edition published in the Taylor & Francis e-Library, 2004.
© 2002 Ehtisham Ahmad & Vito Tanzi
All rights reserved. No part of this book may be reprinted or
reproduced or utilized in any form or by any electronic,
mechanical,or other means,now known or hereafter
invented,including photocopying and recording,or in any
information storage or retrieval system,without permission in
writing from the publishers.
British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging in Publication Data
A catalog record for this book has been requested
ISBN 0-203-21423-4 Master e-book ISBN
ISBN 0-203-27085-1 (Adobe eReader Format)
ISBN 0-415-27738-8(Print Edition)
Contents
List of illustrations ix
List of tables x
List of contributors xiii
Preface xv
Managing fiscal decentralization:overview 1
EHTISHAM AHMAD ANDVITO TANZI
PART I
General themes 15
1 Pitfalls on the road to fiscal decentralization 17
VITO TANZI
2 An introduction to decentralization failure 31
ALBERT BRETON
3 Localization and corruption:panacea or Pandora’s box? 46
TUGRUL GURGUR ANDANWAR SHAH
4 Does decentralization serve the poor? 68
JOACHIM VON BRAUN ANDULRIKE GROTE
PART II
The European Union 97
5 Decentralization and supranationality:
the case of the European Union 99
PIERRE SALMON
6 Consensus democracy and interjurisdictional
fiscal solidarity in Germany 122
PAUL BERND SPAHN ANDOLIVER FRANZ
viii Contents
7 Asymmetric fiscal decentralization in Italy and Spain 144
MATT DAVIES, PIERO GIARDA, STEFANO PIPERNO ANDJULIO VINUELA
PART III
Transition economies 163
8 The effectiveness of decentralization in
Hungary and Slovakia 165
JEAN-JACQUES DETHIER
9 Reforming fiscal federalist relations in Russia:
centralization of resources and
decentralization of autonomy 186
ALEKSEI LAVROV, JOHN M. LITWACK AND DOUGLAS SUTHERLAND
10 Recentralization in China? 205
EHTISHAM AHMAD, KEPING LI ANDTHOMAS RICHARDSON
PART IV
Developing countries 225
11 Argentina:coordination of subnational borrowing 227
JUAN PABLO JIMÉNEZ ANDFLORENCIA DEVOTO
12 Brazil:an evolving federation 265
JOSÉ ROBERTO R. AFONSO ANDLUIZ DE MELLO
13 Fiscal decentralization in Indian federalism 286
M. GOVINDA RAO
14 Indonesia:managing decentralization 306
EHTISHAM AHMAD ANDALI MANSOOR
15 Decentralization in Africa 321
GIORGIO BROSIO
16 Fiscal decentralization in South Africa:
a practitioner’s perspective 350
ISMAIL MOMONIAT
Index 375
Illustrations
Figures
4.1 Conceptual framework 73
4.2 Poverty prevalence and levels of subnational expenditures 84
6.1 The equalization schedule 127
8.1 Public officials’assessments of the levels of corruption in
their institutions 173
9.1 The share of subnational budgets in consolidated state
revenue (before transfers) and expenditures in selected countries 188
9.2 The share of transfers in consolidated regional state
revenues in selected countries 189
9.3 The share of money surrogates in consolidated regional
tax revenue:1995–2000 193
11.1 Primary and global provincial deficit 229
14.1 Regional share of general government 313
14.2 Regional revenues 314
15.1 South Africa:government structure 331
15.2 Ethiopia:government structure 331
15.3 The structure of subregional government in Ethiopia 332
15.4 Mali:government structure 333
15.5 Coˆte d’Ivoire:government structure 334
Charts
7.1 Classification of regional governments 147
10.1 Revenue sharing on and off budget 207
10.2 Extrabudgetary share of total revenue 211
10.3 Transfers as percent of total,1998 212
10.4 Total transfers per capita and GDP per capita in 1998 213
10.5 Total transfers and own revenue,as percent of GDP,in 1998 213
10.6 Per capita revenue returned and per capita GDP in 1998 214
10.7 Per capita transfers other than revenue returned and
per capita GDP in 1998 214
10.8 Composition of revenue in four provinces,1998 221
13.1 Structure of multilevel government in India 290
13.2 Revenue and fiscal deficits of center and states in India 295
13.3 Revenue deficit and current transfers to states 295
14.1 Disqualification under the current transfer system 316