Several transition economies have undertaken fiscal decentralization reforms over the past two decades along with liberalization, privatization, and stabilization reforms. Theory predicts that decentralization may aggravate fiscal imbalances, unless the right incentives are in place to promote...

This paper describes the institutional changes that have induced a decline in the vertical fiscal imbalance (VFI) - defined as the share of sub-national own spending not financed through own revenues - in four European countries: Belgium, Italy, Norway, and Spain. The decline in VFI was achieved...

This paper analyzes the impact of decentralization on overall fiscal performance in the European Union, taking into account fiscal institutional arrangements. We find that spending decentralization has been associated with sizably better fiscal performance, especially when transfer dependency of...

In many countries the decentralization of spending responsibilities has outpaced the decentralization of revenue powers. Sub-national governments have then to rely on transfers from the center and borrowing to finance their spending. When this occurs, we find that the overall fiscal deficit...

Conventional wisdom postulates that there are benefits from decentralizing government finances but there is little empirical evidence about actual country practices. This paper presents data on fiscal decentralization for about 80 countries over a period of about 20 years (1990-2008) from the...

Several transition economies have undertaken fiscal decentralization reforms over the past two decades along with liberalization, privatization, and stabilization reforms. Theory predicts that decentralization may aggravate fiscal imbalances, unless the right incentives are in place to promote...

This paper discusses how decentralized countries can achieve sound fiscal relations between the central government and lower government levels. The concepts of 'vertical gap' and 'vertical balance' provide an analytical framework for identifying and addressing key challenges. These concepts can...

This paper examines key aspects of the ongoing decentralization process in transition economies and identifies areas where the present systems can have potentially adverse impacts on both service delivery and macroeconomic performance. We discuss three critical principles of a sound and...

Countries where social and political institutions stimulate interpersonal trust, civic cooperation, and social cohesiveness tend to have more efficient governments, better governance systems, and faster growth. This paper provides cross-country evidence, based on a sample of developing and...