Browsing by Subject "Fiscal decentralization"

Now showing 1 - 7 of 7

Open Access
Does fiscal decentralization promote fiscal discipline?
(Routledge, 2016) Akin, Z.; Bulut-Cevik, Z. B.; Neyapti, B.
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 sectors utility weight enhances the disciplinary effect of decentralization. © 2016 Taylor & Francis Group, LLC.
Open Access
Fiscal decentralization and deficits: international evidence
(Elsevier BV, 2010) Neyapti, B.
This paper investigates macroeconomic effects of fiscal decentralization, which has been a neglected area of research. Panel evidence for 16 countries over 1980-1998 indicates that expenditure and revenue decentralization reduce budget deficits. A principal finding is that the fiscal disciplining effect of fiscal decentralization increases with population size. Interestingly, absence of local elections is associated with greater effectiveness of fiscal decentralization. The benefits of expenditure decentralization decrease with ethnolinguistic fractionalization and quality of governance. (C) 2010 Elsevier B.V. All rights reserved.
Open Access
Fiscal decentralization, central bank independence and inflation: a panel investigation
(Elsevier BV, 2004) Neyapti, B.
We reinvestigate the relationship between revenue decentralization (RD), central bank independence (CBI) and inflation by modifying the paper by (ECO 72 (2001) 95). We show that, in contrast to the earlier findings, RD has a negative impact on inflation if accompanied by both CBI and local accountability. In low inflation countries, however, RD has a negative impact on inflation even without these additional factors, though CBI accentuates this effect. © 2003 Elsevier B.V. All rights reserved.
Open Access
Fiscal decentralization, fiscal rules and fiscal discipline
(Elsevier, 2013) Neyapti, B.
Fiscal decentralization (FD) and fiscal rules (FR) are institutional mechanisms that are implemented by varying degrees in increasing number of countries. This paper investigates empirically the effect of FR on the effectiveness of FD in achieving fiscal discipline. Panel evidence strongly supports that balanced budget and expenditure rules help FD to achieve this goal, while debt rule has a direct disciplinary effect.
Open Access
Fiscal decentralization, political heterogeneity and welfare
(University of Economics - Prague, 2022) Aslim, Erkmen Giray; Neyapti, Bilin
This paper contributes to the literature on fiscal decentralization by presenting a formal model of the interaction between the central and local governments (CG and LGs, respectively) where LGs may differ in their degree of political alignment with CG. The non-cooperative optimal behaviour of the agents reveals that optimal tax increases with the extent of fiscal decentralization (FD), political unison and spillovers across localities, while LGs’ optimal tax collection effort is negatively associated with all of these parameters. The first novel finding of our study is that both welfare peaks and income distribution are more equitable at a lower level of FD in the case of spillovers than in the case of no spillovers, which supports the decentralization theorem. The second novel finding is that both the amount of redistributable income and central government utility increase with the degree of political unison. © 2022, University of Economics - Prague. All rights reserved.
Open Access
Optimal fiscal decentralization: Redistribution and welfare implications
(Elsevier, 2017) Aslim, E. G.; Neyapti, B.
The literature has been inconclusive regarding the welfare effects of fiscal decentralization (FD), defined here as the extent to which local governments collect and spend local tax revenues. We present an original model to investigate formally the distributional and welfare implications of FD. In contrast to the standard approach that compares the implications of full FD with that of centralization, we consider that the central government chooses the level of FD to maximize welfare in a heterogeneous country. Noncooperatively, local governments choose their tax collection effort to maximize local utility. We show that an increase in the tax rate leads optimal FD to increase so as to compensate for the welfare loss from decreasing optimal local tax effort. Hence, welfare and income distribution improve in FD at its intermediate, rather than extreme, levels. We coin this result as the decentralization-Laffer curve. As regional spillovers increase, FD is less desirable as it deteriorates welfare and income distribution. This finding provides a novel support for the decentralization theorem and contributes to the fiscal policy debate. © 2016 Elsevier Ltd
Open Access
Revenue decentralization and income distribution
(Elsevier BV, 2006) Neyapti, B.
Due to varying local revenue collection capacities and interest group activities, revenue decentralization (RD) may lead to increased inequality. This paper provides empirical evidence, however, that, if coupled with good governance, RD could improve income distribution. (c) 2006 Elsevier B.V. All rights reserved.