Fiscal Federalism and Intergovernmental Financial Relations

  • Jamie Boex
  • Roy Kelly


This chapter discusses how fiscal federalism arrangements relate to and interact with the management of public sector finances — both at the wider general government level and in local governments. In many countries, subnational (or local) governments are assigned responsibility for delivering important public service functions and thus engage in a significant share of public sector spending. In countries that rely on devolved, elected local governments to deliver public services, local governments are typically considered autonomous government entities — entities that are legally and politically separate from the central government and with their own separate budgets. Indeed, a defining characteristic of devolved regional and local governments is that these entities prepare and execute their own budgets, collect some of their revenues from their own sources, and have the ability to engage in borrowing in their own name (IMF 2001).


Local Government Central Government Fiscal Decentralization Fiscal Federalism Local Government Level 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Ahmad, R. 2008. “Governance, Social Accountability and the Civil Society,” JOAAG, Vol. 3(1).Google Scholar
  2. Bahl, R. 1999. “Implementation Rules For Fiscal Decentralization,” International Center for Public Policy, Georgia State University Working Paper 99–1.Google Scholar
  3. Bahl, R., and J. F. Linn. 1992. Urban Public Finance in Developing Countries. Oxford: University Press.Google Scholar
  4. Bahl, R., and J. Martinez-Vazquez. 2007. “The Property Tax in Developing Countries: Current Practice and Prospects,” Lincoln Institute of Land Policy, WP07RB1.Google Scholar
  5. Bardhan, P. 2004. “Decentralization of Governance and Development,” University of California, Berkeley.Google Scholar
  6. Bird, R., and M. Smart. 2002. “Intergovernmental Fiscal Transfers: International Lessons for Developing Countries,” World Development, 30(6): 899–912.CrossRefGoogle Scholar
  7. Boex, J., and J. L. Martinez-Vazquez. 2004a. “Developing the Institutional Framework for Intergovernmental Fiscal Relations in Developing and Transition Economies,” International Studies Program Working Paper 04–02, Andrew Young School of Policy Studies, Georgia State University.Google Scholar
  8. Boex, J., and J. L. Martinez-Vazquez. 2004b. “The Determinants of the Incidence of Intergovernmental Grants: A Survey of the International Experience,” Public Finance and Management, 4(4), December 2004.Google Scholar
  9. Boex, J., and P. Tidemand. 2008. “Intergovernmental Funding Flows and Local Budget Execution in Tanzania,” Report prepared for the Royal Netherlands Embassy.Google Scholar
  10. Boex, J., and S. Yilmaz. 2010. “An Analytical Framework for Assessing Decentralized Local Governance and the Local Public Sector,” IDG Working Paper No. 2010–06, Scholar
  11. Brautigam, D., O. H. Fjeldstad and M. Moore (eds) 2008. Taxation and State-Building in Developing Countries. Cambridge: Cambridge University Press.Google Scholar
  12. Burki, S. J., G. Perry and W. R. Dillinger. 1999. Beyond the Center: Decentralizing the State. World Bank Publications.Google Scholar
  13. Canuto, O., and L. Liu. 2013. Until Debt Do Us Part : Subnational Debt, Insolvency, and Markets. Washington, DC: World Bank.CrossRefGoogle Scholar
  14. Crook, R. C., and J. Manor. 1998. Democracy and Decentralization in South Asia and West Africa: Participation, Accountability and Performance. Cambridge: Cambridge University Press.Google Scholar
  15. Devarajan, S., S. Khemani and S. Shah. 2007 “The Politics of Partial Decentralization,” World Bank.Google Scholar
  16. DFID. 2004. “Characteristics of Different External Audit Systems,” (DFID Policy Division Info series, PD Info 021).Google Scholar
  17. Eaton, K., K. Kaiser and P. Smoke. 2010. “The Political Economy of Decentralization Reforms: Implications for Aid Effectiveness,” World Bank.Google Scholar
  18. Fedelino, A., and T. Ter-Minassian. 2010. “Making Fiscal Decentralization Work: Cross-Country Experiences,” IMF.CrossRefGoogle Scholar
  19. Ferrazzi, G., R. Rohdewohld and others 2009. “Functional Assignment in Multi-Level Government: Volume I: Conceptual Foundation of Functional Assignment” (Germany, GIZ). IMF. 2001. Government Finance Statistics Manual. Washington, DC: IMF.Google Scholar
  20. Kelly, R. 2000. “Designing a Property Tax Reform for Sub-Saharan Africa: An Analytical Framework applied to Kenya,” Public Finance and Budgeting, 20(4): 36–51.CrossRefGoogle Scholar
  21. Litvack, J., J. Ahmed and R. Bird. 1998. “Rethinking Decentralization in Developing Countries,” World Bank.CrossRefGoogle Scholar
  22. Liu, L., and M. Waibel. 2008a. “Subnational Borrowing: Insolvency and Regulations,” Chapter 6 in Anwar Shah (ed.) Macro Federalism and Local Finance. Washington, DC: World Bank.Google Scholar
  23. Liu, L., and M. Waibel. 2008b. “Subnational Insolvency: Cross-Country Experiences and Lessons,” Policy Research Working Paper 4496, Washington, DC: World Bank.CrossRefGoogle Scholar
  24. Mikesell, J. 2007. “Developing Options for the Administration of Local Taxes: An International Review,” Public Budgeting & Finance, 27(1): 41–68.CrossRefGoogle Scholar
  25. Musgrave, R. A., and P. Musgrave. 1989. Public Finance in Theory and Practice. New York: McGraw Hill Book Company, 5th edition.Google Scholar
  26. Oates, W. 1972. Fiscal Federalism. New York: Harcourt Brace Jovanovich.Google Scholar
  27. Oates, W. 1999. “Essay on Fiscal Federalism,” Journal of Economic Literature 37(3): 1120–49.CrossRefGoogle Scholar
  28. Oates, W. 2005. “Toward a Second-Generation Theory of Fiscal Federalism,” International Tax and Public Finance, 12: 349–373.CrossRefGoogle Scholar
  29. OECD. 2006. “Fiscal Autonomy of Sub-Central Governments. OECD Network on Fiscal Relations Across Levels of Government,” Working Paper #2 COM/CTPA/ECO/GOV/ WP(2006)/2.Google Scholar
  30. OECD (Network on Fiscal Relations across Levels of Government). 2009. The Fiscal Autonomy of Sub-Central Governments: An Update. OECD Working Paper 2009–9.Google Scholar
  31. PEFA Secretariat. 2011. “Public Expenditure and Financial Accountability Public Financial Management Performance Measurement Framework (Revised),” January 2011.Google Scholar
  32. PEFA Secretariat. 2013 “Supplementary Guidelines for the Application of PEFA Framework to Subnational Goverments”.Google Scholar
  33. Peterson, G. 2000. “Building Local Credit Systems,” World Bank Urban Management Program, Paper 25. Washington, DC: World Bank.Google Scholar
  34. Peterson, J. E. 2001. “Subnational Debt, Borrowing Process, and Creditworthiness.” Washington, DC: World Bank.Google Scholar
  35. Potter, B. 1997. “Budgetary and Financial Management,” Chapter 6 in Teresa Ter-Minassian (ed.) Fiscal Federalism in Theory and Practice. Washington, DC: IMF.Google Scholar
  36. Pritchett, L., and V. Pande. 2006. “Making Primary Education Work for India’s Rural Poor: A Proposal for Effective Decentralization,” World Bank South Asia Series Working Paper No. 95.Google Scholar
  37. Prud’homme, R. 1995. “On the Dangers of Decentralization,” World Bank Economic Review, 10(2): 201–20.Google Scholar
  38. Reinikka, R., and J. Svensson. 2004. “Local Capture: Evidence from a Central Government Transfer Program in Uganda,” The Quarterly Journal of Economics 119(2): 679–705.CrossRefGoogle Scholar
  39. Ringold, D., A. Holla, M. Koziol and S. Srinivasan. 2012. “Assessing the Use of Social Accountability Approaches in Human Development,” World Bank, 2012.Google Scholar
  40. Rodden, J., G. Eskeland and J. Litvack (eds). 2003. Fiscal Decentralization and the Challenge of Hard Budget Constraints. Cambridge, MA: MIT Press.Google Scholar
  41. Romeo, L. 2003. “The Role of External Assistance in Supporting Decentralization Reforms,” Public Administration and Development 23(1).Google Scholar
  42. Rondinelli, D., and J. Nellis. 1986. “Assessing Decentralization Policies in Developing Countries: The Case for Cautious Optimism,” Development Policy Review, 3–23.Google Scholar
  43. Shah, A. 1994. “The Reform of Intergovernmental Fiscal Relations in Developing and Emerging Market Economies,” Washington, DC: World Bank.CrossRefGoogle Scholar
  44. Shah, A. 2007a. “Institutional Arrangements for Intergovernmental Fiscal Transfers and a Framework for Evaluation,” Chapter 10 in Intergovernmental Fiscal Transfers: Principles and Practice, pp. 293–317.. Washington, DC: World Bank.Google Scholar
  45. Shah, A. 2007b. “A Practitioner’s Guide to Intergovernmental Fiscal Transfers,” Chapter 1 in Intergovernmental Fiscal Transfers: Principles and Practice, pp. 1–53. Washington, DC: World Bank.Google Scholar
  46. Shah, A. (ed.). 2007c. Local Public Financial Management. Washington, DC: World Bank.Google Scholar
  47. Shah, A. (ed.). 2007d. Local Budgeting. Washington, DC: World Bank.Google Scholar
  48. Simson, R., N. Sharma and I. Aziz. 2011. “A Guide to Public Financial Management Literature for Practitioners in Developing Countries: A Tool Kit” ODI, Scholar
  49. Smoke, P., and M. Winters. 2011. “Donor Program Harmonization, Aid Effectiveness and Decentralized Governance,” Development Partners Working Group on Decentralization and Local Governance.Google Scholar
  50. Tanzi, V. 2001. “Pitfalls on the Road to Fiscal Decentralization,” Carnegie Working Paper No. 19.Google Scholar
  51. Ter-Minassian, T. (ed.). 1997. Fiscal Federalism in Theory and Practice. IMF.Google Scholar
  52. UN-HABITAT. 2011. Land and Property Tax: A Policy Guide. Nairobi, Kenya: UN-HABITAT.Google Scholar
  53. Vo, Duc Hong. 2010. “The Economics of Fiscal Decentralization,” Journal of Economic Surveys 24(4): 657–79.CrossRefGoogle Scholar
  54. Wang, V., and L. Rakner. 2005. The Accountability Function of Supreme Audit Institutions in Malawi, Uganda and Tanzania. Chr. Michelsen Institute CMIREPORT (R 2005: 4).Google Scholar
  55. Yilmaz, S., Y. Beris and R. Serrano-Berthet. 2010. “Linking Local Government Discretion and Accountability in Decentralization,” Development Policy Review.Google Scholar

Copyright information

© Jamie Boex and Roy Kelly 2013

Authors and Affiliations

  • Jamie Boex
  • Roy Kelly

There are no affiliations available

Personalised recommendations