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Fiscal decentralization can de be defined as the process of transferring budgetary authority from central government to elected subnational governments in order to grant them power to make decisions regarding taxes and expenses. This paper discusses, theoretically and empirically, what some consider the three pillars of fiscal decentralization: expenditure assignment, revenue assignment, and intergovernmental transfers. In the real world, almost all countries have these three pillars. However, there are no two countries alike because of the different possibilities at hand in designing a decentralized fiscal framework. Here, the international experience is studied to shed some light on the various institutional and practical issues arising in the design and implementation of fiscal decentralization. Not surprisingly, results vary widely, and this experience suggests that there are different ways of achieving a successful framework. Therefore, this paper intends to point and describe the key elements that contribute to achieving an effective decentralized fiscal framework that responds more efficiently to the demands of its constituencies.

Fiscal Decentralization is a popular economic development strategy among transition and developing countries. This article reviews the advantages of fiscal decentralization in a theoretical context, but critiques the relevance of the standard theory of federalism as it applies to emerging economies. It is argued that the macroeconomic benefits of fiscal centralization, the absence of good instruments of local government finance, and the centralist politics that characterize most low income countries have been strong enough to hold back increased emphasis on local government finance.

Fiscal performance of cities in the 1980s and during the 1990-92 recession; US.

In this study of the structure of core city expenditures, Mr. Bahl analyzes the functional relationship between per capita expenditures and selected economic, demographic, and sociological factors. He finds that the problems central to intercity variations in per capita spending are directly related to the coordination of fiscal and physical planning and that economic and social areas, not corporate boundaries, represent the most appropriate planning units. Mr. Bahl extends the static analysis of the pioneering work of Harvey Brazer to a comparative static and temporal context, comparing through regression techniques the factors underlying per capita variations in 198 Standard Metropolitan Statistical Area cities, from 1950 to 1960. His results suggest that the different levels may be primarily attributed to interactions between the central city and the urban fringe and to disparities in the dependence on inter-government revenues.