Does Fiscal Decentralization Promote Fiscal Discipline?

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2016-03-01

Author

Akin, Zafer
Bulut-Cevik, Zeynep B.
NEYAPTI, ŞEN BİLİN

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We investigate the efficiency and equity implications of a redistributive rule that takes into account both local tax collection efforts and deviation of local incomes from respective targets under alternative fiscal mechanisms. We show that, if the general budget constraint is binding, the proposed transfer rule leads to higher fiscal discipline under fiscal decentralization (FD) than under centralized redistribution. Although the centralized decision yields better income distribution than FD, FD also improves income distribution unambiguously when equalization across regions is targeted explicitly. When localities act strategically, the private sector's utility weight enhances the disciplinary effect of decentralization.

Subject Keywords

Fiscal decentralization, Fiscal discipline, Redistribution

URI

https://hdl.handle.net/11511/66846

Journal

EMERGING MARKETS FINANCE AND TRADE

DOI

https://doi.org/10.1080/1540496x.2015.1012920

Collections

Department of Economics, Article

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Citation Formats

Z. Akin, Z. B. Bulut-Cevik, and Ş. B. NEYAPTI, “Does Fiscal Decentralization Promote Fiscal Discipline?,” EMERGING MARKETS FINANCE AND TRADE, pp. 690–705, 2016, Accessed: 00, 2020. [Online]. Available: https://hdl.handle.net/11511/66846.