Why do Differences in the Degree of Fiscal Decentralization Endure?

• Authors: Teresa Garcia-Milà.
• BSE Working Paper: 110666 | September 15

A notable difference between the U.S. and many countries in Europe is in
the degree of fiscal decentralization. Regional (and local) governments in the
U.S. have significant autonomy in setting their own taxes and determining
how to spend their revenues. This is not true of their counterparts in Spain,
France, the United Kingdom, Czech Republic and many other European
countries. In recent years, many countries formerly subject to dictatorships
or communism have been considering decentralizing fiscal responsibility to
sub-national governments as part of the process of democratization (see
Bird and Ebel, forthcoming). Yet, much of Europe remains immune to
adopting effective decentralization in which sub-national units have true
taxing authority