Post Covid Era: Future of Economies and World Order

EnglishTürkçe

CHAPTER


DOI :10.26650/B/SS10.2023.001.09   IUP :10.26650/B/SS10.2023.001.09    Full Text (PDF)

Analysing of the Fiscal Decentralization Effectiveness of Subnational Governments in the Selected Countries Between Two Devastating Crisis

Gonca Güngör Göksu, Durdane Küçükaycan

Fiscal decentralization, one of the main issues in economic research in recent decades, is believed that the management of public financial resources and the service delivery by local governments would be carried out more effectively than central governments. This study aims to determine the fiscal decentralization effectiveness of subnational governments in the 32 countries, divided into two categories as, the unitary states and the federal states, from 2010 to 2019, and to compare the effectiveness levels in the period between the Global Finance Crisis and the COVID-19 Crisis. To calculate the fiscal decentralization efficiency of the selected countries with the data envelopment analysis method, inputs and outputs determined within the scope of different studies in the field of fiscal decentralization are used together. In this study, which is essential in terms of calculating the relative efficiency scores of the countries in the period between the two crises, it is detected that most of the countries analyzed reached high effectiveness scores after the Global Finance Crisis.


Keywords: Fiscal Decentralization, Effectiveness, Subnational Governments, Countries Comparison, DEA

References

  • Adam, A., Manthos, D. D., & Kammas, P. (2014). Fiscal decentralization and public sector efficiency: Evidence from OECD countries. Econ Gov, 15: 17-49. Doi 10.1007/s10101-013-0131-4 google scholar
  • Akai, N., & Sakata, M. (2002). Fiscal decentralization contributes to economic growth: Evidence from state-level cross-section data for the United States. Journal of Urban Economics 52: 93-108. https://doi.org/10.1016/ S0094-1190(02)00018-9 google scholar
  • Alexeev, M., & Mamedov, A. (2017). Factors determining intra-regional fiscal decentralization in Russia and the US. Russian Journal of Economics 425-444. https://doi.Org/10.1016/j.ruje.2017.12.007 google scholar
  • Armey, E. L., & McNab, R. M. (2018). Expenditure decentralization and natural resources. The Quarterly Review ofEconomics and Finance 70, 52-61. Doi: 10.1016/j.qref.2018.05.015 google scholar
  • Arzaghi, M., & Balthrop, A. (2018). No taxation, no representation: An investigation of the relationship between natural resources and fiscal decentralization. Environment and Planning C: Politics and Space 36(7): 12341255. https://doi.org/10.1177/2399654417752683 google scholar
  • Arzaghi, M., & Henderson, V. J. (2005). Why countries are fiscally decentralizing. Journal of Public Economics 1157-1189. https://doi.org/10.1016/j.jpubeco.2003.10.009 google scholar
  • Bakirci, F.. Yakut, E., Demirci, A., & Gunduz, M. (2014). Efficiency measurement in Turkish coal enterprises using data envelopment analysis and data mining. Canadian Social Science 10(1): 103-110. DOI:10.3968/j. css.1923669720141001.3046 google scholar
  • Bartolini, D., Sacchi, A., Salotti, S., & Santolini, R. (2018). Fiscal decentralization in times of financial crises. CESifo Economic Studies 64(3): 456-488. doi: 10.1093/cesifo/ifx008 google scholar
  • Beramendi, P., & Rogers, M. (2020). Fiscal decentralization and the distributive incidence of the great recession. Regional Studies 54(7): 881-896. DOI:10.1080/00343404.2019.1652895 google scholar
  • Bercinturk, T. (2020). OECD Ülkelerinde mali yerelleşmenin belirleyenleri. (Doctoral dissertation), Hacettepe University, Social Science Institution. Available from YOK Thesis Center (No: 652564). google scholar
  • Blöchliger, H., & Egert, B. (2013). Decentralization and Economic Growth — Part 2: The Impact on Economic Activity, Productivity, and Investment. [OECD Working Papers on Fiscal Federalism]. No: 15, Paris, France. google scholar
  • Bodman, P., & Hodge, A. (2010). What drives fiscal decentralization? Further, assess the role of income. Fiscal Studies, 31(3): 373-404. https://doi.org/10.1111/j.1475-5890.2010.00119.x google scholar
  • Boschmann, N. (2009). Fiscal Decentralization and Options for Donor Harmonisation. [Development Partners Working Group on Local Governance and Decentralization]. DPWG-LGD, Berlin, Germany. google scholar
  • Canavire-Bacarreza, G., & Martinez-Vazquez, J. (2012). Reexamining the Determinants of Fiscal Decentralization: What is the Role of Geography? [International Center for Public Policy Working Paper Series, at AYSPS]. GSU paper1211, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University, USA. google scholar
  • Choudhry, S., Heyman, M. I., Beshara, C., Downing, C., Holbreich, M., & Singh, P. (2014). Decentralization in the Unitary States: Constitutional Frameworks for the Middle East and North Africa. [Center for Constitutional Transitions]. International IDEA and the United Nations Development Programme, Berlin, Germany. google scholar
  • Cooper, W. W., Seiford, L. M., & Tone, K. (2006). Introduction to Data Envelopment Analysis and Its Uses with DEA-Solver Software and References. USA: Springer Science+Business Media. google scholar
  • Cetinkaya, O. (2020). Local Administrations Finance. Bursa: Ekin Publishing. google scholar
  • De Borger, B., & Kerstens, K. (1994). Cost efficiency of Belgian local governments: A comparative analysis of FDH, DEA, and econometric approaches. Regional Science and Urban Economics 26(2): 145-170. https:// doi.org/10.1016/0166-0462(95)02127-2 google scholar
  • De Mello, L., & Jalles, J. T. (2020a). The global crisis and intergovernmental relations: centralization versus decentralization 10 years on. Regional Studies 54(7): 942-957. DOI: 10.1080/00343404.2019.1645326 google scholar
  • De Mello, L., & Jalles, J. T. (2020b). Intergovernmental Relations: How the Global Crisis Led to Further Decentralisation. Retrieved from https://voxeu.org/article/intergovernmental-relations-how-global-crisis-led-further-decentralisation. Accessed July 13, 2020. google scholar
  • Demirci, A. (2018). Teori ve Uygulamalarla Veri zarflama Analizi. Ankara: Gazi Publishing. google scholar
  • Doumpos, M., & Cohen, S. (2014). Applying data envelopment analysis on accounting data to assess and optimize the efficiency of Greek local governments. Omega, 46: 74-85. https://doi.org/10.1016/j.omega.2014.02.004 google scholar
  • Dziobek, C., Mangas, C. G., & Kufa, P. (2011). Measuring Fiscal Decentralization — Exploring the IMF’s Databases. [IMF Working Paper, WP/11/126]. Retrieved from https://www.imf.org/external/pubs/ft/ wp/2011/wp11126.pdf, accessed July 5, 2021. google scholar
  • Ebel, D. R., & Yilmaz, S. (2002). On the Measurement and Impact of Fiscal Decentralization. [Policy Research Working Paper]. No.2809. World Bank, Washington, USA. google scholar
  • European Commission. (2013). European Economy: Fiscal Relations Across Government Levels in Times of Crisis — Making Compatible Fiscal Decentralization and Budgetary Discipline. [Economic Papers 501]. Retrieved from https://ec.europa.eu/economy_finance/publications/economic_paper/2013/pdf/ecp501_ en.pdf. Accessed July 5, 2021. google scholar
  • European Committee of the Regions (2021). Division of Powers. Retrieved from https://portal.cor.europa.eu/ divisionpowers/Pages/UK-Fiscal-Powers.aspx, accessed July 5, 2021. google scholar
  • Garrett, G., & Rodden, J. (2006). Globalization and fiscal decentralization. In Globalization and SelfDetermination: Is the Nation-State Under Siege, edited by David. R. Cameron, Gustav Ranis and Annalisa Zinn, pp.278-300. USA: Routledge. google scholar
  • Geys, B., & Moesen, W. (2009). Measuring local government technical (in)efficiency: an application and comparison of FDH, DEA and econometric approach. Public Performance and Management Review, 32(4): 499-513. DOI:10.2753/PMR1530-9576320401 google scholar
  • Ghani, A. J., Grewal, B., Ahmed, A. D., & Noor, N. M. (2017). Efficiency analysis of state governments in the Malaysian fiscal federalism. International Journal of Economics and Management, 11(2): 449-466. google scholar
  • Hayek, A. F. (1945). The use of knowledge in society. American Economic Review, 35(4): 519-530. google scholar
  • Jametti, M., & Joanis, M. (2016). Electoral competition as a determinant of fiscal decentralization. Fiscal Studies, 285-300. [CESifo Working Paper Series 3574]. CESifo. google scholar
  • Justin, L. Y., & Liu, Z. (2000). Fiscal decentralization and economic growth in China. Economic Development and Cultural Change, 49(1): 1-21. https://doi.org/10.1086/452488 google scholar
  • Kutlar, A., Bakirci, F., & Yuksel, F. (2012). An analysis on the economic effectiveness of municipalities in Turkey. African Journal of Marketing Management, 4(3), 80-98. Doi: 10.5897/AJMM11.054 google scholar
  • Kyriacou, A., Muinelo-Gallo, L., & Roca-Sagalés, O. (2016). Regional inequalities, fiscal decentralization, and government quality. Regional Studies, 51(6): 1-13. DOI:10.1080/00343404.2016.1150992 google scholar
  • Lago, I., Lago-Peñas, S., & Martinez-Vazquez, J. (2020). Decentralization after the great recession: fine-tuning or paradigm change? Regional Studies, 54(7): 877-880, Doi: 10.1080/00343404.2020.1711878 google scholar
  • Lago-Peñas, S., Martinez-Vazquez, J., & Sacchi, A. (2020). Fiscal stability during the great recession: putting decentralization design to the test. Regional Studies, 54(7): 919-930, DOI: 10.1080/00343404.2019.1637836 google scholar
  • Lenka, M., & Martinková, S. (2018). Fiscal decentralization determinants: analysis of the EU countries’ clustered sample in period 1995-2015. Economics and Management, 21(2): 157-171. DOI: 10.15240/tul/001/2018-2-011 google scholar
  • Letelier, S. L. (2005). Explaining fiscal decentralization. Public Finance Review, 33(2): 155-183. google scholar
  • Manavgat, G. & Demirci, A. (2020). Decentralization matter of healthcare and effect on regional healthcare efficiency: evidence from Turkey. Sosyoekonomi, 28(44): 261-282. Doi: 10.17233/sosyoekonomi.2020.02.12 google scholar
  • Martinez, Y. B., Arzoz, P. P., & Apeztequia, B. I. (2018). Does decentralization contribute to efficiency? Evidence from OECD countries. Applied Economics, 50(7): 726-742. https://doi.org/10.1080/00036846.2017.1340572 google scholar
  • Milan, J. (2018). Determinants of Fiscal Decentralization-the Recent Evidence in European Countries. Theoretical and Practical Aspects of Public Finance, Prague. Retrieved from https://www.researchgate.net/ publication/330508453_Determinants_of_Fiscal_Decentralization-the_Recent_Evidence_in_European_ Countries. Accessed July 5, 2021. google scholar
  • Musgrave, A. R. (1959). Theory of Public Finance: A Study in Public Economy. New York: McGraw-Hill. google scholar
  • Musgrave, A. R., & Musgrave, P. B. (1989). Public Finance in Theory and Practice. USA: International Student Edition. google scholar
  • Oates, E. W. (1972). Fiscal Federalism. New York, NY: Harcourt Brace Jovanovich. google scholar
  • Oates, E. W. (1993). Fiscal decentralization and economic development. National Tax Journal 46(2): 237-243. google scholar
  • Oates, E. W. (2005). Toward a second-generation theory of fiscal federalism. International Tax and Public Finance, 12(4): 349-373. google scholar
  • Oates, E. W. (2011). On the development of the theory of fiscal federalism: an essay in the history of (recent) economic thought. Journal of Public Finance and Public Choice 29(1-3): 3-24. Doi: https://doi. org/10.1332/251569211X15665367493599 google scholar
  • Ouyang, Y. A., & Li, R. (2021). Fiscal decentralization and the default risk of Chinese local government debts. Contemporary Economic Policy, 39(3): 641-667. Doi: 10.1111/coep.12531. google scholar
  • Ozden, H. U. (2008). Efficiency evaluation of foundation universities in Turkey by using data envelopment analysis (DEA). Istanbul University Journal of the School of Business Administration, 37(2), 167-185. google scholar
  • Panizee, U. (1999). On the determinants of fiscal centralization: theory and evidence. Journal of Public Economics, 74(1): 97-139. https://doi.org/10.1016/S0047-2727(99)00020-1 google scholar
  • Pommerehne, W. W. (1976). Quantitative Aspects of Federalism: A Study of Six Countries. [Diskussionsbeiträge des Fachbereichs Wirtschaftswissenschaften der Universität, 74]. Working Paper. Department of Economics, University of Konstanz, Germany. google scholar
  • Prakash. J. C. (2012). Theory of Fiscal Federalism: An Analysis. [Munich Personal RePEc Archive, MPRAPaper]. No: 41769. Retrieved from https://mpra.ub.uni-muenchen.de/41769/1/MPRA_paper_41769.pdf google scholar
  • Prakash. J. C. (2015). Theory of fiscal federalism: an analysis. Journal of Social and Economic Development, 17(2): 241-259. DOI: 10.1007/s40847-015-0009-0 google scholar
  • Qian, Y., & Weingast, B. R. (1997). Federalism as a commitment to preserving market incentives. Journal of Economic Perspectives, 11(4): 83-92. DOI: 10.1257/jep.11.4.83 google scholar
  • Ramanathan, R. (2003). An Introduction to Data Envelopment Analysis: A Tool for Performance Measurement. California, USA: Sage Publications. google scholar
  • Sacchi, A., & Salotti, S. (2014). Comprehensive analysis of expenditure decentralization and of the composition of local public spending. Regional Studies, 50(1): 93-109. https://doi.org/10.1080/00343404.2014.893387 google scholar
  • Sobel, S. R., Dutta, N., & Roy, S. (2013). Does fiscal decentralization result in a better business climate? Applied Economics Letters, 20(1): 84-91. https://ssrn.com/abstract=2206595 google scholar
  • Sorens, J. (2011). The institutions of fiscal federalism. Publius: The Journal of Federalism, 41(2): 207-231. Doi:10.1093/publius/pjq016 google scholar
  • Stegarescu, D. (2006). Decentralized government in an integrating world quantitative studies for OECD countries. ZEW Economic Studies, 41-80. google scholar
  • Stegarescu, D. (2009). The effects of economic and political integration on fiscal decentralization: evidence from OECD countries. Canadian Journal of Economics, 42(2): 694-718. http://dx.doi.org/10.1111/j.1540-5982.2009.01524.x google scholar
  • Storto, C. lo. (2013). Evaluating technical efficiency of Italian major municipalities: a data envelopment analysis model. Procedia-Social and Behavioral Sciences, 81. 346-350. https://doi.org/10.1016/j.sbspro.2013.06.440 google scholar
  • Ter-Minassian, T. (1997). Fiscal Federalism in Theory and Practice. Washington, DC: International Monetary Fund. google scholar
  • Thanassoulis, E. (2001). Introduction to the Theory and Application of Data Envelopment Analysis. Dordrecht: Kluwer Academic Publishers google scholar
  • Tiebout, C. (1956). A pure theory of local expenditures. Journal of Political Economy, 64(5): 416-424. google scholar
  • Tirtosuharto, D. (2017). Does Fiscal Decentralization Help Indonesia Avoid The Middle-Income Trap? [ADBI Working Paper, Asian Development Bank Institute]. Retrieved from https://www.adb.org/publications/does-fiscal-decentralization-helpindonesia-avoid-middle-income-trap. Accessed July 5, 2021. google scholar
  • Treisman, D. (2006). Explaining fiscal decentralization: geography, colonial history, economic development, and political institutions. Commonwealth and Comparative Politics, 44(3): 289-325. https://doi. org/10.1080/14662040600996991 google scholar
  • Wallis, J. J., & Oates, E. W. (1988). Decentralization in the public sector: an empirical study of state and local government. In Fiscal Federalism: Quantitative Studies, edited by Harvey S. Rosen, pp.5-32. University of Chicago Press. https://doi.org/10.7208/9780226726236-005 google scholar
  • Warner, E. M., Aldag, A. M., & Kim, Y. (2021). Privatization and inter-municipal cooperation in US local government services: balancing fiscal stress, need and political interests. Public Management Review, 23(9): 1359-1376. Doi: 10.1080/14719037.2020.1751255. google scholar
  • Wasylenko, J. M. (1987). Fiscal decentralization and economic development. Public Budgeting, and Finance, 7(4): 57-71. DOI: 10.1111/1540-5850.00764 google scholar
  • Weingast, R. B. (2009). Second generation fiscal federalism: the implications of fiscal incentives, Journal of Urban Economics, 65(3): 279-293. https://doi.org/10.1016/j.jue.2008.12.005 google scholar
  • Weingast, R. B. (2014). Second generation fiscal federalism: political aspects of decentralization and economic development. World Development, 53: 14-25. https://doi.org/10.1016/j.worlddev.2013.01.003 google scholar
  • Worthington, A., & Dollery. B. (2000). An empirical survey of frontier efficiency measurement techniques in local government. Local Government Studies, 26(2): 23-52. Doi:10.1080/03003930008433988 google scholar
  • Zhou, Y., Kong, Y., & Zhang, T. (2019). The spatial and temporal evolution of provincial eco-efficiency in China based on SBM modified three-stage data envelopment analysis. Environmental Science and Pollution Research, 27: 8557-8569. https://doi.org/10.1007/s11356-019-07515-7 google scholar


SHARE




Istanbul University Press aims to contribute to the dissemination of ever growing scientific knowledge through publication of high quality scientific journals and books in accordance with the international publishing standards and ethics. Istanbul University Press follows an open access, non-commercial, scholarly publishing.