Since the early 1980s fiscal and political decentralization have spread around the world. But decentralization can encourage dangerous opportunistic behavior by state and local officials. Left unrestricted, such opportunism can undermine macroeconomic stability and other objectives. The most pressing manifestation of this problem is the softening of subnational budget constraints. The impact of decentralization on public sector efficiency and macroeconomic stability depends on a country's ability to prevent lower-level governments from passing on their liabilities to higher-level governments. This note draws on 11 countries to identify institutional factors associated with hard and soft budget constraints and extract policy lessons for other countries.
Details
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Author
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Document Date
2000/07/31
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Document Type
Brief
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Report Number
21597
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Volume No
1
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Total Volume(s)
1
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Country
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Region
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Disclosure Date
2010/07/01
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Disclosure Status
Disclosed
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Doc Name
Descentralizacao e o desafio das rigidas contencoes orcamentarias
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Keywords
Decentralization in government; Budgets; Subnational government; Financial institutions,Budget Constraints, decentralization, Fiscal Federalism, Hard Budget Constraints,
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Citation
Rodden,Jonathan
Decentralization and the challenge of hard budget constraints : Descentralizacao e o desafio das rigidas contencoes orcamentarias (Portuguese). PREM Notes,no. 41. Public Sector Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/124161468329976433/Descentralizacao-e-o-desafio-das-rigidas-contencoes-orcamentarias