The asymmetric nature of fiscal decentralization: theory and practice

Sacchi, Agnese and Salotti, Simone (2014): The asymmetric nature of fiscal decentralization: theory and practice.

Abstract

A relevant mismatch between tax and expenditure decentralization characterizes many industrialized countries. The former is usually less pronounced than the latter, resulting in asymmetric fiscal decentralization arrangements. We investigate the nature of this asymmetry using a theoretical framework that explains why it is difficult to tackle it, despite a consensus on the benefits of a well-balanced decentralization process. We find that asymmetry is intrinsic to fiscal decentralization, even in a scenario where clear advantages from well-developed decentralized systems arise. This implies that both empirical and theoretical contributions would benefit by taking into account the welfare-reducing asymmetric nature of fiscal decentralization.

• Item Type: MPRA Paper
• Language: English
• Keywords: Expenditure decentralization, fiscal mismatch, local revenue, tax autonomy
• Subjects: H - Public Economics > H7 - State and Local Government ; Intergovernmental Relations > H71 - State and Local Taxation, Subsidies, and Revenue; H - Public Economics > H7 - State and Local Government ; Intergovernmental Relations > H72 - State and Local Budget and Expenditures; H - Public Economics > H7 - State and Local Government ; Intergovernmental Relations > H77 - Intergovernmental Relations ; Federalism ; Secession

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