Fiscal Fragmentation in Decentralized Countries

Fiscal Fragmentation in Decentralized Countries

Subsidiarity, Solidarity and Asymmetry

Edited by Richard M. Bird and Robert D. Ebel

Most countries, developed and developing, are fiscally decentralized with regional and local governments of varying importance. In many of these countries, some of these sub-national governments differ substantially from others in terms of wealth, ethnic, religious, or linguistic composition. This book considers how fiscal arrangements may strengthen or weaken national solidarity and the effectiveness with which public services are provided. In particular, the nation’s ability to cope with changes created by decentralization is explored.

Chapter 1: Subsidiarity, Solidarity and Asymmetry: Aspects of the Problem

Richard M. Bird and Robert D. Ebel

Subjects: economics and finance, political economy, public sector economics, politics and public policy, political economy

Extract

Richard M. Bird and Robert D. Ebel Some countries are born decentralized; some become decentralized; and some have decentralization thrust upon them.1 What can the diverse set of countries included in this book—Belgium, Bosnia and Herzegovina, Canada, China, Germany, India, Indonesia, the Philippines, Russia, Spain and Switzerland—possibly have in common? One important answer is that each contains a significant, territorially-based group of people who are, or who consider themselves to be, distinct and different in ethnicity, in language, in religion or just in history (ancient or recent) from the majority of the population. Indeed, contrary to the common view that the most ‘natural’ nation state is a unified and homogeneous entity, such fragmented countries are found throughout the world (Bird and Stauffer 2001).2 Homogeneous nations are more the exception than the rule. Of the countries studied here, China and Germany are by far the most ethnically homogeneous, but even in China, people who differ from the majority occupy significant areas of territory, and in Germany the recent re-joining of the former East Germany has greatly increased economic differences between regions and strained the fiscal federal system that had been developed in the former West Germany. Heterogeneity, whether ethnic or economic, is a more common feature of most countries than homogeneity. A second important characteristic of many countries, including those discussed in this volume, is that to greater or lesser degrees they exhibit some asymmetry in the way in which their intergovernmental fiscal systems treat different regions. While...

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