Foundations for Sustainable Federalism In Developing Economies

Session Submission Type: Complete Session

Abstract

The discussion explores the evolving complexities and imperatives of fiscal decentralization within the broader framework of global federalism. A central theme is the challenge of measuring fiscal decentralization meaningfully. While cross-country metrics and indexes have advanced the field, they are insufficient on their own. The analysis argues for a multidimensional, context-sensitive approach that combines quantitative indicators with qualitative assessments of intergovernmental fiscal practices, recognizing the path-dependent nature of public sector reform.
Another critical issue addressed is the strategic management of decentralization. Strengthening subnational governments requires more than reallocating fiscal powers—it necessitates a holistic framework that links administrative, political, and fiscal dimensions. Without coordinated implementation across these areas, decentralization reforms risk becoming ineffective. The analysis stresses the need for integrated strategies that move beyond policy design to execution and institutional alignment.
In developing countries, low local tax collection is highlighted as a major constraint to effective decentralization. This is attributed to the assignment of unproductive tax sources and weak administrative capacity. However, the paper emphasizes that improving citizen trust and compliance—especially in property taxation—can significantly enhance revenue generation.
Lastly, the role of political institutions in shaping fiscal federalism outcomes is examined. Institutions that govern democratic accountability, vertical and horizontal coordination, and party systems critically influence whether decentralization leads to positive political, economic, and social outcomes. The research underscores that the quality of political institutions remains a key determinant in the success of federal reforms globally.

Subject Area

• Public Finance in Developing Countries

Chairs

• Izabella Barati Stec, EY

• Daniel Mullins, Ernst & Young / American University (Retd.)

Discussant

• Emil Sunley, IMF (retired)

Individual Presentations

• The Difficulty in Measuring Fiscal Decentralization: The Importance of Context and Place - Serdar Yilmaz, World Bank; Robert Ebel, AYSPS Affiliated

• Increasing Tax Collections by Local Governments in Developing Countries by Improving Tax Compliance - James Alm, Tulane University; Zehra Farooq, Tulane University

• Political Institutions and Fiscal Federalism - Charles Hankla, Public Finance Research Cluster, Georgia State University

• The Evolving Role of Subnational Borrowing in Financing Decentralized Government - Timothy Goodspeed, Hunter College

Session Organizer

• Paul Smoke, New York University