The dilemma of fiscal federalism: grants and fiscal performance around the world

Autores
Rodden, Jonathan
Año de publicación
2001
Idioma
inglés
Tipo de recurso
documento de conferencia
Estado
versión publicada
Descripción
This paper uses cross-national data to examine the effects of federal fiscal and political institutions on the fiscal performance of subnational governments. Balanced budgets among subnational governments are found when either (1) the center imposes strong borrowing restrictions or (2) subnational governments have both wide-ranging taxing and borrowing autonomy. Large and persistent aggregate deficits occur when subnational governments are simultaneously dependent on general-purpose intergovernmental transfers and free to borrow-a combination found most frequently among constituent units in federations. Time-series cross-section analysis reveals that as countries increase their reliance on transfers over time, subnational and overall fiscal performance decline, especially when subnational governments have easy access to credit. These findings illuminate a key dilemma of fiscal federalism and a more precise notion of its dangers: When constitutionally constrained or politically fragmented central governments take on heavy co-financing obligations, they cannot credibly commit to ignore the fiscal problems of lower-level governments.
Departamento de Economía
Materia
Ciencias Económicas
federalismo
política fiscal
Nivel de accesibilidad
acceso abierto
Condiciones de uso
http://creativecommons.org/licenses/by/3.0/
Repositorio
SEDICI (UNLP)
Institución
Universidad Nacional de La Plata
OAI Identificador
oai:sedici.unlp.edu.ar:10915/3662

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spelling The dilemma of fiscal federalism: grants and fiscal performance around the worldRodden, JonathanCiencias Económicasfederalismopolítica fiscalThis paper uses cross-national data to examine the effects of federal fiscal and political institutions on the fiscal performance of subnational governments. Balanced budgets among subnational governments are found when either (1) the center imposes strong borrowing restrictions or (2) subnational governments have both wide-ranging taxing and borrowing autonomy. Large and persistent aggregate deficits occur when subnational governments are simultaneously dependent on general-purpose intergovernmental transfers and free to borrow-a combination found most frequently among constituent units in federations. Time-series cross-section analysis reveals that as countries increase their reliance on transfers over time, subnational and overall fiscal performance decline, especially when subnational governments have easy access to credit. These findings illuminate a key dilemma of fiscal federalism and a more precise notion of its dangers: When constitutionally constrained or politically fragmented central governments take on heavy co-financing obligations, they cannot credibly commit to ignore the fiscal problems of lower-level governments.Departamento de Economía2001-11-26info:eu-repo/semantics/conferenceObjectinfo:eu-repo/semantics/publishedVersionObjeto de conferenciahttp://purl.org/coar/resource_type/c_5794info:ar-repo/semantics/documentoDeConferenciaapplication/pdfhttp://sedici.unlp.edu.ar/handle/10915/3662enginfo:eu-repo/semantics/altIdentifier/url/http://www.depeco.econo.unlp.edu.ar/siff/2001/trabajo10.pdfinfo:eu-repo/semantics/openAccesshttp://creativecommons.org/licenses/by/3.0/Creative Commons Attribution 3.0 Unported (CC BY 3.0)reponame:SEDICI (UNLP)instname:Universidad Nacional de La Platainstacron:UNLP2025-09-29T10:49:17Zoai:sedici.unlp.edu.ar:10915/3662Institucionalhttp://sedici.unlp.edu.ar/Universidad públicaNo correspondehttp://sedici.unlp.edu.ar/oai/snrdalira@sedici.unlp.edu.arArgentinaNo correspondeNo correspondeNo correspondeopendoar:13292025-09-29 10:49:17.609SEDICI (UNLP) - Universidad Nacional de La Platafalse
dc.title.none.fl_str_mv The dilemma of fiscal federalism: grants and fiscal performance around the world
title The dilemma of fiscal federalism: grants and fiscal performance around the world
spellingShingle The dilemma of fiscal federalism: grants and fiscal performance around the world
Rodden, Jonathan
Ciencias Económicas
federalismo
política fiscal
title_short The dilemma of fiscal federalism: grants and fiscal performance around the world
title_full The dilemma of fiscal federalism: grants and fiscal performance around the world
title_fullStr The dilemma of fiscal federalism: grants and fiscal performance around the world
title_full_unstemmed The dilemma of fiscal federalism: grants and fiscal performance around the world
title_sort The dilemma of fiscal federalism: grants and fiscal performance around the world
dc.creator.none.fl_str_mv Rodden, Jonathan
author Rodden, Jonathan
author_facet Rodden, Jonathan
author_role author
dc.subject.none.fl_str_mv Ciencias Económicas
federalismo
política fiscal
topic Ciencias Económicas
federalismo
política fiscal
dc.description.none.fl_txt_mv This paper uses cross-national data to examine the effects of federal fiscal and political institutions on the fiscal performance of subnational governments. Balanced budgets among subnational governments are found when either (1) the center imposes strong borrowing restrictions or (2) subnational governments have both wide-ranging taxing and borrowing autonomy. Large and persistent aggregate deficits occur when subnational governments are simultaneously dependent on general-purpose intergovernmental transfers and free to borrow-a combination found most frequently among constituent units in federations. Time-series cross-section analysis reveals that as countries increase their reliance on transfers over time, subnational and overall fiscal performance decline, especially when subnational governments have easy access to credit. These findings illuminate a key dilemma of fiscal federalism and a more precise notion of its dangers: When constitutionally constrained or politically fragmented central governments take on heavy co-financing obligations, they cannot credibly commit to ignore the fiscal problems of lower-level governments.
Departamento de Economía
description This paper uses cross-national data to examine the effects of federal fiscal and political institutions on the fiscal performance of subnational governments. Balanced budgets among subnational governments are found when either (1) the center imposes strong borrowing restrictions or (2) subnational governments have both wide-ranging taxing and borrowing autonomy. Large and persistent aggregate deficits occur when subnational governments are simultaneously dependent on general-purpose intergovernmental transfers and free to borrow-a combination found most frequently among constituent units in federations. Time-series cross-section analysis reveals that as countries increase their reliance on transfers over time, subnational and overall fiscal performance decline, especially when subnational governments have easy access to credit. These findings illuminate a key dilemma of fiscal federalism and a more precise notion of its dangers: When constitutionally constrained or politically fragmented central governments take on heavy co-financing obligations, they cannot credibly commit to ignore the fiscal problems of lower-level governments.
publishDate 2001
dc.date.none.fl_str_mv 2001-11-26
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dc.language.none.fl_str_mv eng
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