The amalgamation and de-amalgamation period in Montreal (2001de-amalgamation period in Montreal ( -2005 led to the creation of a city in 2006 with 19 decentralized boroughs integrated in a multi-tier metropolitan governance structure. Most recent work on Montreal municipal issues has focused on describing its complex governance structures. Very little attention has been given to the new fiscal relations between the City and its boroughs. Because of the extent of its fiscal decentralization process, the case of Montreal raises the question of how far can it go? Using information collected during meetings with elected officials and public services directors in 2012 and fiscal data analysis, we draw some conclusions on the right level of sub-local decentralization for Montreal. Based on efficiency considerations, the evidence suggests that some responsibilities need to be rescaled leading to more centralization. On the other hand, fiscal autonomy, which enhances accountability at the sub-local level, is also a crucial factor that makes fiscal decentralization work.

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This paper examines the importance of fiscal autonomy in the analysis of decentralization. Using new data published by the OECD (2001, 2002), it reproduces several indicators and proposes new measures of decentralization that take into consideration subnational governments' autonomy over their revenues. Two models are reproduced: Davoodi and Zou (1998) on decentralization and economic growth, and Oates (1985), on decentralization and public sector size. Some evidence suggests that fiscal autonomy positively affects economic growth. Also, it seems to affect the size of the state, but evidence on this relation is limited. Despite some statistical weaknesses, there are sufficient indications to argue that subnational governments' fiscal autonomy should be a major concern when measuring decentralization.

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