Each of government should have clearly assigned responsibilities, regardless of what responsibilities are assigned to government as a whole. Overlaps should generally be avoided, and long concurrent of shared responsibilities are particularly ambiguous. Fiscal and revenue-sharing arrangements between the central and governments should be stable. Sub national governments need to have a sound estimate of these resources before preparing their budgets. Lack of predictability affects both efficiency and fiscal control at the local level. Without an indication of the amount of resources to be transferred to them, sub national governments cannot program their expenditures. Incentives for increased efficiency are needed. However, the central governments reduce transfers to sub national governments when they make economies in spending or improve their own tax collection. The fiscal federalism literature provides some useful principles that be invoked when fleshing out alternative reform agendas and, in particular, the proposed (re)assignment of functions (expenditure responsibilities and taxing powers) between levels of government. These principles relate to: expenditure responsibilities; taxation powers; and intergovernmental grants. Expenditure Responsibilities The principle that deserves mention is that of subsidiary, which has been interpreted in a federal system of government as implying that provision of goods and services should be administered at the lowest level feasible within the national interest. The rationale appears to be that this permits such provision to most closely match the preferences of the people. The second principle to emerge is that of correspondence, which argues that where consumption or use of a particular good or service is limited to the boundaries of a particular jurisdiction, then its provision should be allocated to a sub-national government whose boundaries are defined by the spatial benefit (or market area) boundaries associated with this good or service. The resulting allocation generates economic efficiency since it allows for a matching of local demand and supply, with
Each of government should have clearly assigned responsibilities, regardless of what responsibilities are assigned to government as a whole. Overlaps should generally be avoided, and long concurrent of shared responsibilities are particularly ambiguous. Fiscal and revenue-sharing arrangements between the central and governments should be stable. Sub national governments need to have a sound estimate of these resources before preparing their budgets. Lack of predictability affects both efficiency and fiscal control at the local level. Without an indication of the amount of resources to be transferred to them, sub national governments cannot program their expenditures. Incentives for increased efficiency are needed. However, the central governments reduce transfers to sub national governments when they make economies in spending or improve their own tax collection. The fiscal federalism literature provides some useful principles that be invoked when fleshing out alternative reform agendas and, in particular, the proposed (re)assignment of functions (expenditure responsibilities and taxing powers) between levels of government. These principles relate to: expenditure responsibilities; taxation powers; and intergovernmental grants. Expenditure Responsibilities The principle that deserves mention is that of subsidiary, which has been interpreted in a federal system of government as implying that provision of goods and services should be administered at the lowest level feasible within the national interest. The rationale appears to be that this permits such provision to most closely match the preferences of the people. The second principle to emerge is that of correspondence, which argues that where consumption or use of a particular good or service is limited to the boundaries of a particular jurisdiction, then its provision should be allocated to a sub-national government whose boundaries are defined by the spatial benefit (or market area) boundaries associated with this good or service. The resulting allocation generates economic efficiency since it allows for a matching of local demand and supply, with
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