https://www.sscnet.ucla.edu/polisci/faculty/treisman/Papers/causes.pdf

The causes of corruption: a cross-national study

vogue. Both in the industrialized and in the developing world, nations are turning to devolution to improve the per- formance of their public sectors. In the United States, the central government has turned back significant portions of federal authority to the states for a wide range of major programs, including wel- fare, Medicaid, legal services, housing, and job training. The hope is that state and local governments, being closer to the people, will be more responsive to the particular preferences of their con- stituencies and will be able to find new and better ways to provide these ser- vices. In the United Kingdom, both Scot- land and Wales have opted under the Blair government for their own regional parliaments. And in Italy the movement toward decentralization has gone so far as to encompass a serious proposal for the separation of the nation into two in- dependent countries. In the developing world, we likewise see widespread inter- est in fiscal decentralization with the ob- jective of breaking the grip of central planning that, in the view of many, has failed to bring these nations onto a path of self-sustaining growth. But the proper goal of restructuring the public sector cannot simply be de- centralization. The public sector in nearly all countries consists of several different levels. The basic issue is one of aligning responsibilities and fiscal in- struments with the proper levels of gov- ernment. As Alexis de Toqueville ob- served more than a centuty ago, "The federal system was created with the in- tention of combining the different ad- vantages which result from the magni- tude and the littleness of nations" (1980, v. I, p. 163). But to realize these "dif- ferent advantages," we need to under- stand which functions and instruments are best centralized and which are best placed in the sphere of decentralized levels of government. This is the sub- ject matter of fiscal federalism. As a subfield of public finance, fiscal feder- alism addresses the vertical structure of the public sector. It explores, both in normative and positive terms, the roles of the different levels of government and the ways in which they relate to one another through such instruments as intergovernmental grants.2

/pdf/an-essay-on-fiscal-federalism-10yjc9cqdb.pdf

An Essay on Fiscal Federalism

List of Figures ix List of Tables xi Preface and Acknowledgments xiii Introduction 1 PART I: VETO PLAYERS THEORY 17 One: Individual Veto Players 19 Two: Collective Veto Players 38 PART II: VETO PLAYERS AND INSTITUTIONAL ANALYSIS 65 Three: Regimes: Nondemocratic, Presidential, and Parliamentary 67 Four: Governments and Parliaments 91 Five: Referendums 116 Six: Federalism, Bicameralism, and Qualified Majorities 136 PART III: POLICY EFFECTS OF VETO PLAYERS 161 Seven: Legislation 165 Eight: Macroeconomic Policies 187 PART IV: SYSTEMIC EFFECTS OF VETO PLAYERS 207 Nine: Government Stability 209 Ten: Judiciary and Bureaucracies 222 Eleven: Veto Players Analysis of European Union Institutions 248 Conclusion 283 Bibliography 291 Index 309

Veto Players: How Political Institutions Work

Empirical estimates suggest that fiscal decentralization in government spending is associated with lower government corruption. The relationship between decentralization of government activities and the extent of rent extraction by private parties is an important element in the recent debate on institutional design. The theoretical literature makes ambiguous predictions about this relationship, and it has remained virtually unexamined by empiricists. Fisman and Gatti make a first attempt at examining the issue empirically, by looking at the cross-country relationship between fiscal decentralization and corruption as measured by a number of different indices. Their estimates suggest that fiscal decentralization in government spending is significantly associated with lower corruption. Moreover, they find that the origin of a country's legal system - for example, civil versus common legal code - performs extremely well as an instrument for decentralization. The estimated relationship between decentralization, when so instrumented, and corruption is even stronger. The evidence suggests a number of interesting areas for future work, including investigating whether there are specific services for which decentralized provision has a particularly strong impact on political rent extraction, and understanding the channels through which decentralization succeeds in keeping corruption in check. This paper - a product of Macroeconomics and Growth, Development Research Group - is part of a larger effort in the group to study the determinants of corruption. The authors may be contacted at rf250@columbia.edu or rgatti@worldbank.org.

https://papers.ssrn.com/sol3/Delivery.cfm/1048.pdf?abstractid=629144&mirid=1&type=2

Decentralization and Corruption: Evidence across Countries

Drawing on a wide range of literature and ideas, a new “second-generation theory of fiscal federalism” is emerging that provides new insights into the structure and working of federal systems. After a restatement and review of the first-generation theory, this paper surveys this new body of work and offers some thoughts on the ways in which it is extending our understanding of fiscal federalism and on its implications for the design of fiscal institutions.

http://web.stanford.edu/~jrodden/oates.pdf

Toward A Second-Generation Theory of Fiscal Federalism

The author highlights some of the dangers of decentralizations. The benefits of decentralization in allocative efficiency are not as obvious as suggested by the standard theory of fiscal federalism. The assumptions of this theory are fragile. These doubtful benefits might carry a cost in production efficiency, but more empirical research is needed on this point. What is not doubtful is that decentralization runs counter to redistribution and stabilization. Decentralization makes redistributive policies, whether interpersonal or interjurisdictional, more difficult, if not impossible. Decentralization also makes macroeconomic stabilization programs more difficult to implement because subnational government fiscal policies can run counter to national policies. Serious drawbacks or potential drawbacks should be considered in designing any decentralization program. The arguments that the author develops make it easier to understand some of the real choices. These choices are not so much whether to decentralize in general but rather what functions to decentralize - in which sectors, and in which regions. Guidelines can be provided on this. Often, the problem is not so much whether a certain service should be provided by a central, regional, or local government, since the service often has to be provided with the intervention of all three levels of government. The real challenge is how to organize the joint production of the service. Decentralization refers simultaneously to a state and to a process. The virtues and dangers of decentralization are often discussed simultaneously for both concepts. This is a dangerous confusion because decentralization is path-dependent. What is desirable in a given country at a certain point in time depends on the present state of decentralization and the speed at which it has been reached. Much more work, particularly empirical work, is needed -- in review of decentralization (or centralization) experiences in general, as well as those encouraged or supported by the World Bank.

/pdf/the-dangers-of-decentralization-3og0x3zag7.pdf

The dangers of decentralization

In France, as in a number of other countries, there are many forms of property taxes and several levels of government to raise them. But there are reasons to expect Ile de France to be representative of France. The importance of local land taxes in France can be related to local taxation, to property taxation in general, to total taxes in France, and to the market value of the property taxed. The main feature – largely ignored by most theorists – appears to be the very large interjurisdictional disparities in terms of tax bases. The large intercommunal disparities between tax bases and tax yields explain why commune taxes do not play a key role in the financing of local public services in France. Since these subsidies are much more even, and in part inversely related to local tax bases, the disparities in per capita revenues between communes are much smaller than disparities in per capita local taxes. 

Remy Dec Prud'homme

Papers

The dangers of decentralization

Property taxation in France