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The authors test the effect of expenditure decentralization and fiscal equalization on short- and long-run economic growth and estimate two-step generalized method of moment (GMM) simultaneous equations models, using panel data for China and India for the period 1985 to 2005. The authors estimate two simultaneous equations: a growth equation and equalization equation and find that expenditure decentralization has a negative and statistically significant effect at conventional levels on short-run economic growth for both China and India. However, the authors also find that this result is sensitive to the set of included explanatory variables. This leads the authors to conclude that expenditure decentralization has no effect on short-run economic growth for either country. The authors also find that expenditure decentralization has a positive and statistically significant effect on fiscal equalization for both countries but find no evidence that fiscal equalization affects short-run economic growth for either China or India. In contrast, the authors find that expenditure decentralization has a positive effect on long-run economic growth in the case of India, but not in the case of China. Finally, the authors report evidence that fiscal equalization has no effect on long-run economic growth in the case of China; however, the authors find that equalization has a positive and statistically significant at conventional levels effect on long-run economic growth in India.

The authors estimate two-step GMM simultaneous equations models, using panel data for China and India for the period 1985 to 2005. To examine the effect of fiscal decentralization (FD) policies on economic growth in China and India, the authors estimate two equations: a growth equation and an equalization equation. For the growth equation, the authors adopt a production-function-based model that is widely used in the empirical literature on growth; however, the authors do make some compromises with this specification due to the unavailability of certain data. For the equalization equation, the authors include variables that economic theory and empirical evidence suggest influence fiscal disparities among subnational governments which in turn influence the demand for horizontal fiscal equalization (HFE). To the extent possible, the authors employ the same econometric specification, variable constructions and sample periods for both China and India. The authors believe this strategy provides a more rigorous test of the FD hypothesis.

The authors find that expenditure decentralization has a negative and statistically significant effect at conventional levels on short-run economic growth for both China and India. However, the authors also find that this result is sensitive to the set of included explanatory variables. This leads to conclude that expenditure decentralization has no effect on short-run economic growth for either country. The authors also find that expenditure decentralization has a positive and statistically significant effect on fiscal equalization for both countries but find no evidence that fiscal equalization affects short-run economic growth for either China or India. In contrast, the authors find that expenditure decentralization has a positive effect on long-run economic growth in the case of India, but not in the case of China. Finally, the authors report evidence that fiscal equalization has no effect on long-run economic growth in the case of China; however, the authors find that equalization has a positive and statistically significant at conventional levels effect on long-run economic growth in India.

Due to the importance of FD policies, especially to many developing countries that are currently pursuing decentralization reforms, future research should examine the effect of FD on economic growth for other countries. Furthermore, although it would be difficult to do so, future research should examine whether FD promotes political stability on ethnically diverse countries.

To the best of the authors’ knowledge, no one has examined the effect of FD policies on India's growth experience. What is more is that this is also the first of its kind to have a comprehensive empirical investigation into these two major developing countries with very interesting similarities and differences in FD policies. It is thus of great importance to examine the effect of expenditure decentralization and HFE on economic growth in China and India.

The aim of the research was to identify factors related to the increased cost of providing health services to clients from a non‐English speaking background (NESB), using a cross‐sectional analysis of the administrative records of clients using community health services in the Northern Metropolitan region of Melbourne for the 2001/2002 financial year. The higher cost of providing services to NESB clients was influenced by four factors: increased consultation time, group attendance to an appointment, increased interpreting cost and the type of service provider. Family members and multilingual staff play a significant role in providing informal interpreting services or low‐cost support for NESB consultations, and these activities should receive appropriate support. Additional funding is needed to support interpreting requirements when dealing with the health needs of NESB clients. Vertical funding equity would provide a better solution than the current horizontal equalisation funding.

The purpose of this paper is to make policy recommendations for the current fiscal decentralization discussion by examining the operating mechanisms of local taxes, unconditional grants, and conditional grants within the fiscal relationships between the national government and local governments in Korea.

After examining the current fiscal relationships between the national government and the local governments, this paper analyzes trends of local taxes, unconditional grants from both national and high-level local governments, and conditional grants from both national and high-level (or provincial level) local governments between 2002 and 2015. Local governments are classified into high-level local governments, and three types of low-level local governments are: si, kun, and ku.

Since the structure of local government finances in Korea is very complicatedly intertwined, the present decentralization discussion regarding increasing the share of local tax revenues may not achieve its purpose of fiscal decentralization. The authorities in charge of revenue allocation should be first decentralized at high-level local governments; high-level local governments should then arrange unconditional and conditional grants from high-level local governments to low-level local governments while taking into consideration unconditional and conditional grants from the national government to low-level governments.

The dichotomy between the central government and local municipalities has been utilized in the existing discussion regarding fiscal decentralization in Korea, but this study highlights the important resource allocation roles of high-level local governments.

The purpose of this paper is to investigate to what extent the initiatives of local governments to launch modernisation processes are facilitated by local autonomy, which is increasingly important in both the theory and practice of public policy and management.

Local government reforms are distinguished according to the institutional structure at which they are directed and local autonomy is assessed as a multidimensional concept. Drawing on a multilevel analysis of the Swiss case, this paper combines data stemming from a survey conducted at the local tier with secondary data from the regional tier.

The main empirical findings are threefold. First, when local governments undertake managerial or political reform initiatives, their autonomy with respect to higher levels of government matters. Second, it is not local autonomy but rather the perception of structural problems that is the force driving territorial reforms. Third, it is not the autonomy enjoyed by local governments vis-à-vis local factors, but rather the pressures stemming from that context that may lead to reforms.

By adopting a comparative approach to local autonomy, this paper shows that local governments which have sufficient latitude for local policy making are likely to take initiatives to improve service delivery in accordance with local preferences.

The impact of fiscal decentralization on equalization between regions has received significant attention but there has been much less research of the impact of decentralization on equalization within regions. Theory suggests that the tradeoff between local fiscal autonomy and equalization ought to be most pronounced at the sub-region level where rural-urban disparities in the level of development are substantial. This paper is an empirical analysis of the impact of fiscal decentralization on equalization within one Russian region, Leningrad (State). We show that the regional government uses a mixture of fiscal instruments to strike a balance between giving more budgetary autonomy to local governments and eliminating the disparities among them. We also develop a method for studying this tradeoff between decentralization and equalization when only limited data are available. Finally, we argue and demonstrate that without a detailed understanding of the institutional arrangement for intergovernmental fiscal relations, one cannot evaluate the equalization or decentralization implications.

Australian fiscal federalism possesses a greater degree of vertical imbalance than comparable federations elsewhere due to a concentration of revenue-raising powers at the level of the Commonwealth government and a concentration of expenditure functions at the state and local government levels. Efforts to deal with this problem have focused on intergovernmental grants. While substantial literature exists on the financial nexus between the Commonwealth and state governments, little research effort has been expended on the local government grants process. The present paper seeks to remedy this by documenting the evolution and role of the local government grants process.

The purpose of this paper is to examine resource allocation under the centrally sponsored scheme Sarva Shiksha Abhiyan (SSA) and its impact on development of elementary education in India. First, the author describes the current educational disparity across states in terms of state funding. Second, the author shows that interstate disparities in education resources have more to do with capacity of states to finance elementary education. For this, the author examines funding mechanism under SSA, focusing on principles of adequacy and absorptive rates. Third, the author analyzes the impact of additional funding on the progress of elementary education across states. Fourth, the author demonstrates how funding under SSA reinforces rather than reduces interstate disparity in school funding. Finally, the author concludes with certain policy implications for reforming federal transfers in Right to Education (RTE)-SSA, which can easily be extended to Rashtria Madhya Shiksha Abhiyan (RMSA) to be more responsive to educational inadequacy, effort and capacity across states.

The author uses box plots for illustrating interstate disparity across various indicators on financing and growth of elementary education. Box plots are good at portraying extreme values and illustrate differences between distributions. Because the thrust of the paper is examining difference in distribution across and within states, box plots appropriately portray the distribution of both. Further, coefficient of variation is estimated in education funding and its impact variables.

Interstate disparity in additional to the funding of SSA through discretionary transfers is examined by looking at two principles of inter-governmental transfers, viz., adequacy and absorptive rates. In a way, it appears that the educationally backward states getting the highest shares and also as per the requirement of the child population, but not necessarily so in terms of their relative proportions of enrolment, schools and teachers. Yet another revelation is that actual absorptive rates are much less than apparent absorptive rates. Unambiguously, additional resources coming from the Center for Development of Education can have a positive influence only after states have achieved a certain threshold level of absorptive capacities. As evidenced, fiscal disability is not compensated by transfers via SSA, as matching shares are uniform across states.

One significant limitations of the study is its use of administrative data. Often, administrative data from developing countries especially on social sector like education report inflated figures. The study uses primarily such but published secondary data sources.

Finally, the author suggests certain policy implications for reforming federal role in the current RTE-SSA, which can easily be extended to RMSA, a CSS in secondary education, to be more responsive to state effort and capacity.

Though SSA attempts to address regional imbalance, the accumulated initial advantage of better-off states with uniform norms under SSA funding widens the interstate disparity rather than reduce it. It is, hence, mandated to look at building capacities and enable states for a level-playing field.

It adds value to existing studies in two ways: rarely studies examine SSA expenditures and its impact on development and financing of elementary education, and examine a question on horizontal equalization mechanism whether additional allocation under SSA induce or reduce interstate disparity.

This paper aims to analyse the phenomenon of race to the bottom in a federation and provides answer to the question why developing countries are more prone to race to the bottom competition than developed countries.

The paper considers a two-stage game where, in the first stage, two regional governments in a federation choose tax rate on mobile capital employed in its own region by maximising its regional per capita income, and in the second stage, a representative firm chooses capital and labour employment in the two regions by maximising total profit. As capital is mobile across regions, tax policy chosen by any region affects other region. From strategic interaction between the regional governments, the authors derive Nash equilibrium tax rates. Comparing Nash equilibrium with Pareto optimum outcome, race to the bottom is characterised.

The paper finds that federations with poorer endowment of capital are more prone to the race to the bottom outcome. The result is robust to the introduction of different types of asymmetries between the regions and a centrally executed revenue equalisation scheme. Whilst it hints at the fact that capital accumulation can naturally solve the race to the bottom problem, it identifies the presence of an equalisation scheme and equity concern at the regions to weaken the impact of capital accumulation in achieving such an outcome.

The role of capital endowment in the race to the bottom literature in fiscal federalism has previously been ignored. This has serious implications for developing countries like China and India where states compete with each other for attracting private capital in their own jurisdictions.

The purpose of this paper is to examine the financing and provision of basic public services in China. The main issue addressed is how to reform the public finance system to achieve quality and fairness in the provision of basic public services.

Based on an historical analysis of the functional transformation of the public finance system in China and on an empirical analysis of the current public finance system and the public service provision system, a comprehensive understanding was gained about the relationship between the financing and provision of basic public services.

The paper argues that there is a close relationship between the provision of basic public services and the functional changes made to the public finance system. Based on a systematic retrospective study of the Chinese Government’s efforts to improve basic public services over the last three decades, this paper offers policy suggestions on further public finance restructuring that would support better service provision.

By analyzing issues in the public service provision system, this paper contributes to the debate about the efficiency improvement made to governmental functions in China.