Fiscal consolidation and decentralisation: A tale of two tiers

Darby, J., Muscatelli, V.A. and Roy, G. (2005) Fiscal consolidation and decentralisation: A tale of two tiers. Fiscal Studies, 26(2), pp. 169-195. (doi:10.1111/j.1475-5890.2005.00009.x)

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Abstract

This paper contributes to the established literature on fiscal consolidations 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.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Roy, Dr Gareth and Muscatelli, Professor Anton
Authors: Darby, J., Muscatelli, V.A., and Roy, G.
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Fiscal Studies
Publisher:Blackwell Publishing
ISSN:0143-5671
ISSN (Online):1475-5890
Published Online:20 June 2005

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