Externalities and Bailouts PDF Download

Author: David E. Wildasin
Publisher: World Bank Publications
ISBN:
Category : Bailouts (Government policy)
Languages : en
Pages : 42

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Author: David Onditi
Publisher: GRIN Verlag
ISBN: 3346078965
Category : Political Science
Languages : en
Pages : 33

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Essay from the year 2019 in the subject Business economics - Economic Policy, grade: A, University of Nairobi (School of Business), course: PhD Economics, language: English, abstract: The author aims to study the impacts of fiscal decentralization and soft budget constraint on the scale of local government debts. Moreover, the effect of soft budget constraint on the scale of local government debt under the different extent of fiscal decentralization will be discussed. Due to the linkage between economic growth and the fiscal decentralization, the expansion in the local government debt is closely related to the fiscal decentralization and the soft budget constraint (SBC) – the expectation that the local governments would be bailed out by the central government if they face debt challenges. Based on the literature fiscal decentralization is linked to local government debts as literature indicates that fiscal decentralization leads to the decentralization of the expenditure without the revenue collection powers. The Chinese local governments have increased expenditure budgets on public services but the powers of taxation are centralized. To bridge the revenue gaps, the local governments take up debts that are sunk into infrastructure and other low revenue generating investments. Soft budget constraints are thus a product of fiscal decentralization as they are based on the principal – agent relationship between the politicians and the voters, central government and local government and the local governments and the SOEs within the local jurisdictions.

Author: Jonathan Rodden
Publisher: MIT Press
ISBN: 9780262182294
Category : Business & Economics
Languages : en
Pages : 502

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A multi-country study of the conditions under which decentralized countries might ensure fiscal discipline.

Author: Andrei Timofeev
Publisher:
ISBN:
Category :
Languages : en
Pages : 49

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Author: Guiseppe Pisauro
Publisher: INTERNATIONAL MONETARY FUND
ISBN: 9781451848687
Category :
Languages : en
Pages : 30

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Fiscal decentralization is likely to entail a bias in the budget process toward higher public expenses and deficits. The paper reviews lessons drawn from the theoretical literature and international experience on the design of intergovernmental relations. The institutional setup should address the dual problem of "common tax resources" and "soft" budget constraints, where policies devised to correct one problem may exacerbate the other. An approach based on full tax autonomy of lower-tier governments and reliance on market discipline, not supplemented by self-imposed constitutional limits, is not advisable. More effective seems to be a cooperative approach with some preeminence granted to the central government.

Author: Jesper Dannesboe
Publisher:
ISBN:
Category :
Languages : en
Pages : 45

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Author: E. David Wildasin
Publisher:
ISBN:
Category :
Languages : en
Pages :

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November 1997 A local government's ability to extract a bailout from a central government depends on how big it is. Larger localities may rationally expect bailouts-and thus operate under softer budget constraints. Effective fiscal decentralization requires an institutional structure that minimizes these adverse incentives. Subnational governments are assuming greater fiscal responsibility in many developing and transition countries. There is concern, however, that fiscal decentralization may weaken fiscal discipline-that local authorities may undertake commitments or incur debt obligations that subsequently result in massive central government support, in the form of extraordinary transfers, or bailouts. (Recent experience in major U.S. cities shows that these problems are not restricted to developing countries.) Such bailouts could in turn cause national fiscal imbalances, excessive borrowing, and macroeconomic instability. Some analysts recommend that central authorities maintain strict control over the fiscal behavior of lower-level governments, but others argue that such controls could undercut the goals of fiscal decentralization, including autonomy. Wildasin shows that central authorities may have strong incentives to prop up the finances of local governments when the public services provided locally benefit the rest of society. The prospect of such interventions may in turn create incentives for localities to underprovide services that produce substantial spillover benefits, using local resources instead for purposes that may benefit local constituencies but not nonresidents. When central fiscal interventions are big enough, and when a loss of local control over the use of fiscal resources is not too costly to local residents, local decisionmakers will act to induce central government bailouts, resulting in inefficient outcomes for the system as a whole. This is not to say that fiscal decentralization produces perverse incentives or requires central government control over local fiscal policies. But incentives for bailouts can be especially strong when local governments are considered too big to fail-for example, New York, Philadelphia, and Washington, DC (in the United States) and São Paulo and Rio de Janeiro (in Brazil). In such cases, the repercussions from major breakdowns in the provision of services-or in debt servicing-can be too costly for central governments to ignore. Problems of fiscal discipline may result not because there is too much fiscal decentralization, says Wildasin, but because there is too little. It may make sense to carry out more thorough decentralization-for example, devolving fiscal authorities to smaller jurisdictions or special-purpose functional units, or subdividing large subnational jurisdictions into many smaller units. This paper-a product of the Development Research Group-is part of a larger effort in the group to understand fiscal decentralization.

Author: Giuseppe Pisauro
Publisher:
ISBN:
Category : Decentralization in government
Languages : en
Pages : 36

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Author: Ernesto Crivelli
Publisher: International Monetary Fund
ISBN: 1455201308
Category : Business & Economics
Languages : en
Pages : 28

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Government spending on health has grown as a percent of GDP over the last 40 years in industrialized countries. Widespread decentralization of healthcare systems has often accompanied this increase in spending. In this paper, we explore the effect of soft budget constraints on subnational health spending in a sample of OECD countries. We find countries where subnational governments rely primarily on central government financing and enjoy large borrowing autonomy have higher healthcare spending than those with more restrictions on subnational government borrowing.

Author: Laura von Daniels
Publisher: Edward Elgar Publishing
ISBN: 1783475951
Category : Business & Economics
Languages : en
Pages : 221

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Book Description
How can governments control spending pressure from influential groups, often representing powerful regional interests? This book is concerned with institutional solutions that allow modern nation states to balance historically grown cultural, political and economic diversity. Laura von Daniels combines different literatures in economics and political science, and draws on interviews with former government leaders, and country experts from international organizations. She applies this research to topics such as fiscal institutions and budget balances, presenting a critical review of different institutional approaches to resolving fiscal imbalances and public indebtedness. Students and scholars of various disciplines, including politics, public and social policy, economics and business will find the discussions and detailed description of institutional reforms in emerging market nations to be of use to their research. It will also be of interest to practitioners working on fiscal decentralization and budget control.