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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.
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Chapter 2: The Country Studies: Comparisons and Conclusions

Richard M. Bird, Robert D. Ebel and Sebastiana Gianci


Richard M. Bird, Robert D. Ebel and Sebastiana Gianci Many countries around the world are decentralizing to various degrees, in various ways and for various reasons. No matter the form that the decentralization takes, its fiscal aspects are always important and are sometimes dominant in determining outcomes. This book explores the idea that the design of a country’s intergovernmental fiscal relations may play an especially critical role in ‘fragmented’ nations, namely, those in which territorially-based linguistic or ethnic groups live together within the boundaries of a single nation state. In some circumstances, granting such groups greater authority to raise and spend revenues as they see fit may enhance social and political harmony. In other circumstances, however, freeing such groups from central government control may encourage separatist tendencies and ultimately the nation’s disintegration. Of course, even though many other factors also affect how subsidiarity in the fiscal sphere relates to national solidarity, money definitely matters. How funds are raised, distributed and spent is an important determinant of the extent to which fragmented societies are able to sustain a viable and effective national government. This book focuses on fiscal relations between the central governments of nation states and major regional or intermediate governments. This emphasis omits some points of interest. For example, one can argue that that the more important economic questions relate to lower-tier governments, such as local or municipal governments, especially with respect to service delivery.1 Others have noted that even the most established and representative democracies many not recognize...

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