ESC
Clarivate

 
Source: Journal Citation ReportsTM from ClarivateTM 2022

Entrepreneurship and Sustainability Issues Open access
Journal Impact FactorTM (2022) 1.7
Journal Citation IndicatorTM (2022) 0.42
Received: 2021-08-15  |  Accepted: 2021-10-15  |  Published: 2021-12-30

Title

The degree of fiscal decentralization in European Union countries in different stages of the economic cycle


Abstract

The debate surrounding fiscal decentralization is revived in times of threats to sustainable development whose effects are first experienced at the decentralized (local) level and are then transferred to the central level. The extent to which the management of public funds is decentralized is determined mainly by a country’s legal system, but also by economic, political and historical factors. A balanced relationship between central control and local autonomy in fiscal management can improve a country’s economic performance. This factor could play a key role in planning effective measures to minimize the adverse consequences of the economic recession caused by the Covid-19 pandemic. The aim of this study was to evaluate the degree of fiscal decentralization in European Union (EU) countries, to identify groups of EU Member States characterized by a similar degree of fiscal decentralization, and to describe their economic performance. The degree of fiscal decentralization was evaluated based on local government revenues as a percentage of the GDP in EU Member States. Agglomerative clustering and k-means clustering methods were used to identify groups of countries with similar degrees of fiscal decentralization. The economic performance of countries in each group was evaluated with the use of standard macroeconomic indicators. Three groups of countries with similar degrees of fiscal decentralization were identified. The most decentralized countries were Denmark, Sweden and Finland. These countries were characterized by the highest levels of economic growth. Eco-nomic growth was lowest in the countries that joined the EU after 2004. These countries were characterized by the relatively highest inflation rates and the lowest average household incomes.


Keywords

decentralization, local finance, local government, European Union, local sustainability


JEL classifications

H72 , H77 , C38


URI

http://jssidoi.org/jesi/article/909


DOI


Pages

198-208


This is an open access issue and all published articles are licensed under a
Creative Commons Attribution 4.0 International License

Authors

Wichowska, Anna
University of Warmia and Mazury in Olsztyn, Olsztyn, Poland http://www.uwm.edu.pl
Articles by this author in: CrossRef |  Google Scholar

Journal title

Entrepreneurship and Sustainability Issues

Volume

9


Number

2


Issue date

December 2021


Issue DOI


ISSN

ISSN 2345-0282 (online)


Publisher

VšĮ Entrepreneurship and Sustainability Center, Vilnius, Lithuania

Cited

Google Scholar

Article views & downloads

HTML views: 2258  |  PDF downloads: 871

References


Ban, C., & Gallagher, K. (2015). Recalibrating policy orthodoxy: The IMF since the great recession. Governance, 28(2), 131-146. https://doi.org/10.1111/gove.12103

Search via ReFindit


Baskaran, T., Feld, L. P., & Schnellenbach, J. (2016). Fiscal federalism, decentralization, and economic growth: a meta‐analysis. Economic Inquiry, 54(3), 1445-1463. https://doi.org/10.1111/ecin.12331

Search via ReFindit


de Mello Jr, L. R. (2005). Globalization and fiscal federalism: does openness constrain subnational budget imbalances?. Public Budgeting & Finance, 25(1), 1-14. https://doi.org/10.1111/j.0275-1100.2005.00351.x

Search via ReFindit


Ebel, R. D., & Yilmaz, S. (2002). On the measurement and impact of fiscal decentralization. Policy Research Working Paper, 2809, World Bank.

Search via ReFindit


Eurostat (2020). Retrieved December 12, 2020 from https://ec.europa.eu/eurostat/data/database

Search via ReFindit


Feld, L. P., & Schnellenbach, J. (2011). Fiscal federalism and long-run macroeconomic performance: a survey of recent research. Environment and Planning C: Government and Policy, 29(2). https://doi.org/10.1353/wp.2002.0016

Search via ReFindit


Hansjörg, B., & Junghun, K. (Eds.). (2016). Fiscal federalism 2016 making decentralisation work: Making decentralisation work. OECD Publishing.

Search via ReFindit


Jain, A. K. (2010). Data clustering: 50 years beyond K-means. Pattern recognition letters, 31(8), 651-666. https://doi.org/10.1007/978-3-540-87479-9_3

Search via ReFindit


Kargol-Wasiluk, A., & Wildowicz-Giegiel, A. (2018). The quality of public finance in the light of fiscal governance concept: implications for the European Union countries. Equilibrium. Quarterly Journal of Economics and Economic Policy, 13(3), 411-426. https://doi.org/10.24136/eq.2018.020

Search via ReFindit


Keen, M. J., & Kotsogiannis, C. (2004). Tax competition in federations and the welfare consequences of decentralization. Journal of Urban Economics, 56(3), 397-407. https://doi.org/10.1016/j.jue.2004.04.005

Search via ReFindit


Kyriacou, A. P., Muinelo‐Gallo, L., & Roca‐Sagalés, O. (2015). Fiscal decentralization and regional disparities: The importance of good governance. Papers in Regional Science, 94(1), 89-107. https://doi.org/10.1111/pirs.12061

Search via ReFindit


Lago-Penas, I., Lago-Penas, S., & Martinez-Vazquez, J. (2011). The political and economic consequences of decentralization. Environment and Planning C: Government and Policy, 29, 197-203. https://doi.org/10.1068/c2902ed

Search via ReFindit


Malkina, M. Y. (2021). How the 2020 pandemic affected tax revenues in Russian regions?. Equilibrium. Quarterly Journal of Economics and Economic Policy, 16(2), 239–260. https://doi.org/10.24136/eq.2021.009

Search via ReFindit


Małkowska, A., Urbaniec, M., & Kosała, M. (2021). The impact of digital transformation on European countries: insights from a comparative analysis. Equilibrium. Quarterly Journal of Economics and Economic Policy, 16(2), 325–355. https://doi.org/10.24136/eq.2021.012

Search via ReFindit


Martinez-Vazquez, J., & McNab, R. M. (2006). Fiscal decentralization, macrostability, and growth. Hacienda Pública Española/Review of Public Economics, 179, 25-49.

Search via ReFindit


Martinez‐Vazquez, J., Lago‐Peñas, S., & Sacchi, A. (2017). The impact of fiscal decentralization: A survey. Journal of Economic Surveys, 31(4), 1095-1129. https://doi.org/10.1111/joes.12182

Search via ReFindit


Murtagh, F., & Legendre, P. (2014). Ward’s hierarchical agglomerative clustering method: which algorithms implement Ward’s criterion?. Journal of classification, 31(3), 274-295. https://doi.org/10.1007/s00357-014-9161-z

Search via ReFindit


Musgrave, R. (1959). The theory of public finance. New York: McGraw-Hill.

Search via ReFindit


Neyapti, B. (2013). Fiscal decentralization, fiscal rules and fiscal discipline. Economics Letters, 121(3), 528-532. https://doi.org/10.1016/j.econlet.2013.10.006

Search via ReFindit


Oates, W. (2008). On the evolution of fiscal federalism: Theory and institutions. National Tax Journal, 61(2). https://doi.org/10.17310/ntj.2008.2.08

Search via ReFindit


Oates, W. E. (1972). Fiscal federalism. New York: Harcourt Brace.

Search via ReFindit


OECD (2020). Fiscal Decentralisation Database. Retrieved January 2, 2021 from https://www.oecd.org/tax/federalism/fiscal-decentralisation-database/

Search via ReFindit


Roszko-Wójtowicz, E., & Grzelak, M. M. (2021). Multi-dimensional analysis of regional investment attractiveness in Poland. Equilibrium. Quarterly Journal of Economics and Eco-nomic Policy, 16(1), 103–138. https://doi.org/10.24136/eq.2021.004

Search via ReFindit


Salmon, P. (2013). Decentralization and growth: what if the cross-jurisdiction approach had met a dead end?. Constitutional Political Economy, 24(2), 87-107. https://dx.doi.org/10.1007/s10602-013-9137-8

Search via ReFindit


Schneider, A. (2003). Decentralization: conceptualization and measurement. Studies in comparative international development, 38(3), 32-56. http://dx.doi.org/10.1007/BF02686198

Search via ReFindit


Sepulveda, C. F., & Martinez-Vazquez, J. (2011). The consequences of fiscal decentralization on poverty and income equality. Environment and Planning C: Government and Policy, 29(2), 321-343. http://dx.doi.org/10.1068/c1033r

Search via ReFindit


Slavinskaitė, N. (2017). Fiscal decentralization and economic growth in selected European countries. Journal of Business Economics and Management, 18(4), 745-757. https://doi.org/10.3846/16111699.2017.1292312

Search via ReFindit


Szymańska, A. (2018). National fiscal frameworks in the post-crisis European Union. Equilibrium. Quarterly Journal of Economics and Economic Policy, 13(4), 623-642. https://doi.org/10.24136/eq.2018.030

Search via ReFindit


Thalassinos, E., Cristea, M., & Noja, G. G. (2019). Measuring active ageing within the European Union: implications on economic development. Equilibrium. Quarterly Journal of Economics and Economic Policy, 14(4), 591–609. https://doi.org/10.24136/eq.2019.028

Search via ReFindit


Tibshirani, R., Walther, G., & Hastie, T. (2001). Estimating the number of clusters in a data set via the gap statistic. Journal of the Royal Statistical Society: Series B (Statistical Methodology), 63(2), 411-423. https://doi.org/10.1111/1467-9868.00293

Search via ReFindit


Ward, J. H. (1963). Hierarchical grouping to optimize an objective function. Journal of the American Statistical Association, 58(301), 236-244. https://doi.org/10.1080/01621459.1963.10500845

Search via ReFindit


Weingast, B. R. (2014). Second generation fiscal federalism: Political aspects of decentralization and economic development. World Development, 53, 14-25. https://doi.org/10.1016/j.worlddev.2013.01.003

Search via ReFindit


Wildowicz-Giegiel, A. (2019). The role of independent fiscal councils in improving fiscal performance of the European Union countries . Equilibrium. Quarterly Journal of Economics and Economic Policy, 14(4), 611–630. https://doi.org/10.24136/eq.2019.029

Search via ReFindit