I thank Anna Bordon, Mariana Colacelli, Luc Eyraud, Davide Furceri, Christoph Klingen, Esther Perez Ruiz, Bahrom Shukurov, two anonymous referees and the editor Sergei Guriev for helpful comments. I am grateful to Kia Penso and Kadia Kebet for excellent editorial work. The views expressed herein are those of the authors and should not be attributed to the IMF, its Executive Board or its management.
Local governments’ fiscal balance and privatization in transition countries1
Article first published online: 18 SEP 2012
© 2012 The Author. Economics of Transition © 2012 The European Bank for Reconstruction and Development
Economics of Transition
Volume 20, Issue 4, pages 677–703, October 2012
How to Cite
Crivelli, E. (2012), Local governments’ fiscal balance and privatization in transition countries. Economics of Transition, 20: 677–703. doi: 10.1111/j.1468-0351.2012.00446.x
- Issue published online: 18 SEP 2012
- Article first published online: 18 SEP 2012
- Received: January 4, 2012; Acceptance: June 19, 2012
- Fiscal decentralization;
- soft budget constraints;
Several transition economies have undertaken fiscal decentralization reforms over the past two decades along with liberalization, privatization and stabilization reforms. Theory predicts that decentralization may aggravate fiscal imbalances, unless the right incentives are in place to promote fiscal discipline. This study uses a panel of 20 transition countries over 19 years to address a central question of fact: Did privatization help to promote local governments’ fiscal discipline? The answer is clearly ‘no’ for privatization considered in isolation. However, privatization and subnational fiscal autonomy along with reforms to the banking system – restraining access to soft financing – may prove effective at improving fiscal balances among local governments.