This paper discusses how decentralized countries can achieve sound fiscal relations between the central government and lower government levels. The concepts of 'vertical gap' and 'vertical balance' provide an analytical framework for identifying and addressing key challenges. These concepts can...

We can enhance development by making it easier for people to “vote with their feet” between jurisdictions. Few, if any, policy reforms can achieve such enormous increases in economic growth and opportunity. Foot voting is, in several crucial respects, a better mechanism of political...

The paper discusses the reasons and possible resolutions of the contradictions in the Hungarian local government system, and proposes methods to resolve them. The nature of the Hungarian system cannot be described by classical normative theories of fiscal federalism. The operation of Hungarian...

In prior studies, accounting and decentralization corruption solutions have so far been analysed in isolation. In this article, we connect these two strands of literature on corruption. Understanding this connection is important because weak financial accounting and reporting systems can inhibit...

This paper exploits the introduction of the right of referenda at the local level in the German state of Bavaria in 1995 to study the fiscal effects of direct democracy. In the first part of the paper, we establish the relationship between referenda activity and fiscal performance by using a new...

This paper studies the efficiency of decentralized leadership in federations where selfish regional governments provide regional and federal public goods and the benevolent central government implements interregional earmarked and income transfers. Without residential mobility, unlimited...

According to the fiscal federalism literature sub-central budget constraints become softer when local governments are more dependent on revenues over which they have no discretion. As a consequence of higher "transfer dependency", sub-central governments can expect to be bailed out by the...

We explore how the vertical structure of direct democracy in a federal context affects expenditure decisions of sub-central governments. In so doing we revisit previous research on the effect of direct democratic institution on public policies. Particularly, the effect of upper-level (state)...

This paper studies the efficiency of decentralized leadership in federations where selfish regional governments provide regional and federal public goods and the benevolent central government implements interregional earmarked and income transfers. Without residential mobility, unlimited...

We explore how the presence of direct democracy across hierarchical levels of government in a federation affects the level of public expenditure. In so doing we revisit the effect of direct democratic institutions on public policies. Particularly, we are interested whether the effect of...