This work is a contribution to the second generation theory sgt of fiscal federalism that studies fiscal federalism through contemporary economic and industrial organization theory. First, it establishes context by introducing the two classic motivations in support of federalism. Fiscal federalism has been the subject of debate in the us for a number of years, perhaps not surprisingly. One can readily see in the table that some topics, like those numbered 5 to 8, are present in each selected source.
Click download or read online button to get the future of fiscal federalism book now. Both in the industrialized and in the developing world, nations are turning to devolution to improve the performance of their public sectors. According to oates, therefore, there are solid economic reasons for preferring a federal structure of the state. From this frequency, one could infer that they are essential to the understanding of fiscal federalism and decentralization. On the evolution of fiscal federalism national tax association. Fiscal federalism is a general normative framework for the assignment of functions to the different levels of.
The framework is a synthesis of the dominant political and economic approaches to this issue. Vito tanzi, 1996, fiscal federalism and decentralization. Bird university of toronto the analysis of the problems that give rise to, and arise from, the existence of more than one level of government within the same geographical area. First, it establishes context by introducing the two classic motivations in support of federalism, namely, incentives and knowledge. Oates decentralization theorem the provision of public services should be located at the lowest level of government encompassing, in a spatial sense, the relevant benefits and costs oates, 1999.
The term was introduced by the germanborn american economist richard musgrave in 1959. This site is like a library, use search box in the widget to get ebook that you want. In canada, the federal government levies value added tax and provinces levy retail sales taxes. Introduction fiscal federalism, under which provision of public goods is decentralized to subnational governments, allows public consumption levels to be tailored to suit the preferences of a heterogeneous population. As a subfield of public economics, fiscal federalism is concerned with understanding which functions and instruments are best centralized and which are best placed in the sphere of decentralized levels of government oates, 1999. Brazil levies vat at both the central and state levels. The term was originally coined by ralph musgrave, a us economist, in 1959, followed by wallace oates 1972. An essay on fiscal federalism an essay on fiscal federalism wallace e. Macro federalism and local finance managing natural resources and the environment. Published in volume 37, issue 3, pages 11201149 of journal of economic literature, september 1999, abstract. Dickson abstract the objective of this paper is to investigate the effects of fiscal federalism on economic welfare in nigeria between 1970 and 2009 using an econometric approach. This is, according to oates 1999, the fundamental subject matter of fiscal federalism.
Environmental education resources to commemorate earth days 50th anniversary. Assignment of responsibilities and fiscal federalism forum of. Oates is professor of economics at the university of maryland, where he is also a member of the bureau of business and economic research. Main contributions to this theory were made by tiebout 1956, musgrave 1959 or oates 1972. The analysis shows that federalism, which allows publicgood levels to be tailored to suit the differing demands of young and old consumers, who live in different jurisdictions, increases the incentive to save.
Zax, examine the distribution of power and responsibilities among the various levels of government. As originally developed by musgrave 1959 and oates 1972, the theory of fiscal federalism con. Agenda for amendments 95 both the central and subnational levels. Fiscal federalism is concerned with understanding which functions and instruments are best centralized and which are best placed in the sphere of decentralized levels of government oates, s. Fiscal federalism deals with the division of governmental functions and financial relations among levels of government.
Nepals fiscal federalism model in the new constitution. Paircoil2 submit sequences to paircoil2 view supplementary data download paircoil2. The ordinary least square ols technique is adopted. Empirical essays on fiscal federalism and political. Needs, sources and untilization, princeton university press, princeton, nj. Framework and implementation aehyung kim the world bank. An empirical study of state and local government john joseph wallis and wallace e. Fiscal federalism is part of broader public finance discipline. Though the latter approaches the problem of fiscal federalism from different perspectives, it does not challenge but complements the former. Oates is a professor of economics at the university of maryland and a university fellow with resources for the future. Pdf old and new theories of fiscal federalism, organizational. New york, harcourt brace jovanovich 1972 dlc 78185772 ocolc277959. Oates 1972, the theory of fiscal federalism con cerns the division of publicsector functions and fi. This reprinted edition includes a new preface that briefly describes the origins of the book and comments on the evolution of the theory and practice of fiscal federalism since its publication.
Toward a secondgeneration theory of fiscal federalism. A central issue addressed in the literature on fiscal federalism is the economic roles of the different levels of government e. Toward a secondgeneration theory of fiscal federalism wallace e. The recent scholarship has made distinction between two generations of literature in fiscal federalism. This structure, in fact, is optimal not only because of.
This paper uses an endogenousgrowth model with overlapping generations to explore the connection between fiscal federalism and economic growth. Decentralized governments can better cater heterogeneous interests than a centralized government. Drawing on a wide range of literature and ideas, a new secondgeneration theory of fiscal federalism is emerging that provides new insights into the structure and working of federal systems. This case is based on an improved allocation of resources in the public sector. Oates 1999 makes the point that fiscal federalism implies a rather narrow concern with budgetary matters. Fiscal federalism, financial relations between units of governments in a federal government system. We are grateful to our discussant, james hines, and to the other participants of the nber conference on fiscal federalism for some very helpful comments on an earlier draft of this paper.
Oates march 21, 1937 october 30, 2015 was a distinguished university professor of economics at the university of maryland. Oates and a great selection of related books, art and collectibles available now at. Oates argues that federalism combines the advantages of. Pdf toward a secondgeneration theory of fiscal federalism. Iimi 2005 investigates this relationship in an econometric growth. He has written widely on environmental affairs and is coauthor of the theory of environmental policy and author of the economics of environmental regulation. In other words, it is the study of how competencies expenditure side and fiscal instruments revenue side are allocated across different vertical layers of. The political economy of federalism american political. Monograph analysing concept of a fiscal federalism in which taxation and debt finance in a federal system is dealt with.
On the theory and practice of fiscal decentralization. Fiscal policy 53 miscellaneous macro federalism issues 57 overall conclusions 68. Oates and a great selection of similar new, used and collectible books available now at great prices. Wallace oates was a distinguished university professor emeritus at the university of maryland and a university fellow at resources for the future. He received his phd in economics at stanford in 1965 and joined the faculty at princeton university. Indeed, the united states founding fathers, in the federalist, argued the advantages of a strong but limited federal government and independent state. The idea is that decentralization can increase economic welfare.
On the theory and practice of fiscal decentralization wallace e. Pdf an essay on fiscal federalism semantic scholar. Assignment of responsibilities and fiscal federalism. Fiscal competition and its implications a direct challenge to the fiscal federalism prescription has emerged in some of the literature on fiscal competition. One segment of this literature contends that competition among governments leads to the underprovision of public services. As the decentralisation theorem demonstrates, fiscal federalism ensures that public services are provided corresponding to the diversified demand conditions in a federation oates, 1972. It then explores a series of important topics that are the subject of current research. The study has critically analysed the first generation theory and second generation theory of fiscal federalism. Remote work advice from the largest allremote company. The future of fiscal federalism download ebook pdf, epub. The welfare gains from fiscal federalism accrue due to several reasons.
The first three papers, by john joseph wallis and wallace e. The wallis oates paper provides a broad historical perspective on the extent and evolution of fiscal decentralization in the state and local sector. He taught in the fields of public economics and environmental economics, and was considered a major international figure in both fields. Second generation fiscal federalism 3 1 also in this approach is the work of congleton, kyriacou, and bacaria 2003, cremer and palfrey 2002, iaryczower, saiegh, and to mmasi 2000, jones, sanguinetti, and tomasi 1999, kenny and winer 2006.
An essay on fiscal federalism 1123 some further analysis, for providing some insights into the determinants of the magnitude of the welfare gains from fiscal decentralization oates 1998. An essay on fiscal federalism american economic association. Oates the traditional theory of public finance has made a strong case for a major role for fiscal decentralization. Fiscal federalism and economic growth sciencedirect. Since his first book, fiscal federalism 1972, he explored the assignment of functions to different levels of government in a federal system, the provision of local public goods, the design of intergovernmental grants, and the structure of local revenue systems. Decentralization and the provision of public services. As originally developed by musgrave 1959 and oates 1972, the theory of fiscal federalism concerns the division of publicsector functions and finances in a logical way among multiple layers of government king 1984. Fiscal federalism is the analysis of the problems that give rise to, and arise from, the existence of more than one level of government within the same geographical area. For overviews of the literature on fiscal federalism, see wildasin 1986 and oates 1999.
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