Bulletin n. 0/2004
December 2004
CONTENTS
  • Section A) The theory and practise of the federal states and multi-level systems of government
  • Section B) Global governance and international organizations
  • Section C) Regional integration processes
  • Section D) Federalism as a political idea
  • Rodden Jonathan
    On the Migration of Fiscal Sovereignty
    in Political Science and Politics , issue 3, vol. 37, july ,  2004 ,  427-431
    ABSTRACT: As authority over public expenditures has shifted from central to provincial and local governments in countries around the world over the last two decades, prevailing approaches to the study of decentralization in welfare economics and public choice from the 1970s and 1980s have given way to new political economy approaches. The first generation of theories envisioned central and lower-level governments as distinct sovereigns within their own spheres of activity. Recognizing a more complex reality, the political economy literature is rethinking the notion of sovereignty in multi-tiered systems. Motivated by recent difficulties with fiscal decentralization and fiscal discipline, this essay rethinks the notion of fiscal sovereignty, viewing it as an evolving set of beliefs in the context of a dynamic game of incomplete information played between central and subnational governments. 1 Provincial or local governments, along with their creditors and voters, attempt to assess the credibility of the central government's commitment to abide by pre-specified intergovernmental fiscal arrangements. When higher-level governments dominate the field of taxation and take on heavy co-financing obligations—as central governments do in virtually all newly decentralizing countries—the central government's commitment not to bail out subnational governments in the event of debt-servicing crises is not credible. In other words, subnational governments without significant tax autonomy will not be viewed as sovereign borrowers, and this has important implications for their fiscal behavior.
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