Fiscal Decentralisation and Economic Theory

Abstract

Abstract.There is no complete overview or discussion of the literature of the economics of federalism and fiscal decentralization, even though scholarly interest in the topic has been increasing significantly over recent years. This paper provides a general, brief but comprehensive overview of the main insights from the literature on fiscal federalism and decentralization. In doing so, literature on fiscal federalism and decentralization is grouped into two main approaches: "first generation of theories" and "second generation of theories".

Fiscal Decentralization: Is There a Simultaneous Relationship Between Regional Independence and Social Welfare?

“…This result is in line with the theory of fiscal federalism. According to the theory, delegating authority to local units will enhance fiscal and service quality to meet people's satisfaction as local government needs to be reelected (Slavinskaite, 2017). These results align with Ginting et al (2019) and Masaki (2018).…”

“…This study is based on the theory of fiscal federalism. The theory refers to the division of government functions and financial authority among the lower levels of government (Oates, 1972in Martinez-Vazquez, Lago-Peñas, & Sacchi, 2017Slavinskaite, 2017). This theory relates to the concept of geopolitics government management based on the geographical aspect (Rosen, 1988).…”

“…Fiscal federalism theory underlies the transfers to regions to aid vertical and horizontal fiscal imbalances so that every region can do productive public spending (Ejobowah, 2018). The head of local governments use these transfers to deliver their best service to receive the public's sympathy, and as a result, they can be voted for again (Slavinskaite, 2017). The public's sympathy also affects their tax compliance, thereby improving local tax revenue.…”

“…Fiscal federalism is also claimed to improve social welfare due to cost efficiency, time efficiency, and the higher suitability of services to the needs of the people (Jha, 2012;Rosen, 1988;Yushkov, 2016). Local governments are very well informed of local needs and preferences and can provide appropriate public goods and services (Jha, 2012;Slavinskaite, 2017). Fiscal federalism through intergovernmental transfers also gives the local government enough budget for more productive public spending (Ejobowah, 2018).…”

Evaluation of factors having an impact on the development of the sharing economy

“…However, the multicriteria method has been effectively applied to the complex evaluation of complex quantities. A range of multicriteria methods such as SAW (Simple Additive Weighting), AHP (Analytic Hierarchy Process), TOPSIS (Technique for Order Preference by Similarity to an Ideal Solution), PROMETHEE (Preference Ranking Organisation Method for Enrichment Evaluation), COPRAS (Complex proportional assessment), ELECTREI (Elimination and Choice Translating Reality) and others are widely used in scientific research (Balcerzak, 2017;Balcerzak & Pietrzak, 2017a, 2017bJiang-Jiang Wang et al, 2009;Stankevičienė & Menčaitė, 2012;Nugaras & Ginevičius, 2015;Ginevičius et al, 2018;Dobrovolskienė, 2016;Slavinskaitė, 2017;Banasik et al, 2016;Memari et al, 2019;Guerrero-Baena et al, 2015;Latinopoulos & Kechagia, 2015;Podvezko, 2009;Wierzbicka, 2018;Pietrzak & Ziemkiewicz, 2018a, 2018bCalabrese et al, 2019;Balvanshi &Tiwari, 2018;Diaz-Balteiro et al, 2017;. Furthermore, multicriteria methods are applied in doctoral dissertations of social sciences (Gedvilaitė, 2019;Slavinskaitė, 2017;Podviezko, 2013;Kraujalienė, 2019a,b;Rakauskienė, 2013;Kareivaitė, 2012;Labanauskis, 2020;Šimelytė, 2014;Dobrovolskienė, 2016;Bruzgė, 2014;Ubartė, 2017).…”