INSEAD Library

Includes bibliographical references

Digitized

Decentralization: A Few Principles from the Theory of Fiscal Federalism Contents FOREWORD .......................................................................................................... 5 1. DECENTRALIZATION: ATTEMPTED DEFINITIONS........................................ 9 2. WHAT ADVANTAGES ARE THERE TO DECENTRALIZING?....................... 21 3. ASSIGNMENT OF POWERS TO DIFFERENT LEVELS OF GOVERNMENT...........................................................................................29 3.1 Lessons from the Traditional Theory of Fiscal Federalism ......................... 30 3.2 Expanding Traditional Theory to Make it More Operational ....................... 35 4. WHAT TYPE OF TAXATION AT WHAT LEVEL OF GOVERNMENT? .......... 43 4.1 Vertical Externalities and Coordination Difficulties between Levels of Government .......................................................................................... 47 4.2 And Now a Look at "Good" Local Taxes... If They Exist............................. 51 5. WHAT AUTONOMY?........................................................................................ 61 5.1 Financial Autonomy .................................................................................... 62 5.2 Budget Autonomy........................................................................................ 67 6. BUDGET TRANSFERS.....................................................................................71 6.1. Justifications for Budget Transfers ............................................................ 72 6.2. Criteria Definitions ..................................................................................... 76 6.3. General Principles ..................................................................................... 81 7. BUDGET DISCIPLINE AND CONSTRAINT..................................................... 83 7.1. Local Governments' Borrowing Capacity .................................................. 83 7.2. Budget Constraints .................................................................................... 87 7.3. Assignment of "Rights" to Deficit and Debt to Levels of Government ....... 91 8. CONCLUSION.................................................................................................. 95 BIBLIOGRAPHY............................................................................................. 99