Are Federal Countries more Decentralized than Unitary Ones? A Comparative Analysis of Fiscal Decentralization in European and Latin-American Countries

CRISTIAN ALTAVILLA

Tartu

Conferencia; 6th Graduate Student Conference of the European Consortium for Political Research (ECPR); 2016

European Consortium for Political Research (ECPR) - Tartu University

Fiscal decentralization has been a worldwide trend in the last decades. However, it has not been uniform in all cases, acquiring different shapes in different countries and within a same country over time. The most striking aspect is that decentralization has occurred within different institutional settings, involving federal as well as traditionally unitary countries. This paper intends, on the one hand, contribute to an elaboration of some variables or indicators to measure fiscal decentralization and, on the other hand, propose a theoretical framework that differentiates concepts that literature has taken as synonyms or has confused them. In doing so, this paper compares decentralization in federal as well as unitary countries, taking as case study federal and unitary countries in Latinamerica and Europe: Argentina, Uruguay, Germany and Denmark, respectively, in a descriptive study over the last fifteen years (2000-2015). Autonomy is a theoretical construct and, as such, is a measurable phenomenon throughout different indicators. In this paper, I propose six indicators: (1) Constitutional allocation of competences and powers, to measure the size of subnational government. (2) The constitutional allocation of revenue-raising capacity between levels of government in order to measure the formal or institutional decentralization of autonomy?s fiscal aspect and the scope of local power taxation. (3) Revenues directly levied by each level of government, excluding federal transfers in order to measure the degree of fiscal autonomy of subnational governments, considering, therefore, the effective exercise of such powers. (4) The mechanism of transfer of central funds to subnational units. Considering local own-resources plus federal transfers we can have an index to measure the total amount of resources at the disposal of subnational governments. The existence of transfers from the central government implies the insufficiency of local resources to meet their responsibilities ? and consequently a lesser autonomy regarding to what and how much to expend. It is necessary therefore to consider the size and character of these transfers (conditional or unconditional, discretionary or non-discretionary) in order to measure the extent of dependency in administration of their competences and delivery of public services. (5) Total expenditure of each level of government is another useful index to measure the size of subnational administration of competences and public services. It is also complementary to the former (central transfers) to measure the degree of dependency or autonomy with which levels of governments perform their responsibilities (WATTS 1996:68). In this respect, it is necessary to distinguish in which extent subnational units cover their expenses with own resources and in which percentage with federal transfers. Variables (3), (4) and (5) lead us to another index, the sixth variable, (6) fiscal imbalance that measures the gap between the federal transfers and the total subnational spending. The paper ends with some conclusions drawn from the comparison of proposed variables in each country.