Fiscal Consolidation and Decentralisation : A Tale of Two Tiers

Darby, Julia and Muscatelli, V Anton and Roy, Graeme (2004) Fiscal Consolidation and Decentralisation : A Tale of Two Tiers. Discussion paper. University of Strathclyde, Glasgow.

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    Abstract

    This paper contributes to the established literature on fiscal consolidations (e.g. Alesina and Perotti, 1995, 1997, Alesina et al, 1998) by investigating the distinct behaviour of central and sub-central tiers of government during general government consolidation attempts. In the light of different degrees of decentralisation across OECD countries, and the different responsibilities devolved to sub-central tiers, we believe that this approach offers an illuminating insight into the analysis of fiscal consolidations and their success. We show that the involvement of the sub-central tiers of government is crucial to achieving cuts in expenditure, particularly in relation to the overall size of the government wage bill. In addition, central governments appear to exert a strong influence on the expenditure of sub-central tiers through their grant allocations, and control of these allocations appears to have a considerable impact upon the overall success of consolidation attempts. Finally we demonstrate that there is a skewness in cuts towards sub-central capital expenditure both when central governments cut grant allocations and when sub-central governments engage in lone consolidation attempts.

    Creators(s): Darby, Julia ORCID logoORCID: https://orcid.org/0000-0003-4425-7222, Muscatelli, V Anton and Roy, Graeme;
    Item type:Monograph(Discussion paper)
    ID code:67785
    Notes:Published as a paper within the Discussion Papers in Economics, No. 04-01 (2004)
    Keywords:fiscal studies, monetary policy, economics, government spending, Economic Theory, Economics, Econometrics and Finance(all)
    Subjects:Social Sciences > Economic Theory
    Department:Strathclyde Business School > Economics
    Strathclyde Business School > Fraser of Allander Institute
    Depositing user: Pure Administrator
    Date deposited:14 May 2019 09:15
    Last modified:13 Jan 2021 02:57
    URI:https://strathprints.strath.ac.uk/id/eprint/67785
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