OVERVIEW ON FISCAL FEDERALISM
DOI:
https://doi.org/10.18623/rvd.v23.n4.4780Keywords:
Public Finance, Fiscal Federalism, Fiscal Decentralization, Local GovernmentAbstract
This article provides an overview of fiscal federalism, exploring its theoretical underpinnings, practical implementations, and contemporary challenges. Fiscal federalism is defined as the financial and administrative relationships within a federal system of government, addressing the distribution of fiscal responsibilities and resources across central, regional, and local levels. The article examines key principles such as decentralization, subsidiarity, and fiscal equivalence, alongside the evolution of fiscal federalism theory through first and second-generation models. Practical implementations are analyzed using indicators like revenue assignment, expenditure responsibilities, intergovernmental transfers, and fiscal autonomy, culminating in the Fiscal Decentralization Index (FDI). The study highlights how these indicators facilitate cross-country comparisons and inform policy development. Contemporary issues such as globalization, economic disparities, asymmetric federalism, and the flypaper effect are discussed, alongside case studies from the United States, Germany, India, Brazil, and Canada, illustrating the diverse approaches to fiscal decentralization. It concludes that while fiscal federalism holds great promise for enhancing government efficiency and responsiveness, its success depends on careful implementation, continuous assessment, and adaptation to local contexts.
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