Adapting intergovernmental fiscal transfers for the future
Emerging trends and innovative approaches
Intergovernmental fiscal transfers (IFTs) play a crucial role in addressing vertical
and horizontal imbalances, promoting equitable service delivery, and aligning local
spending with national priorities across OECD countries. However, their design involves
navigating complex trade-offs between equity, efficiency, transparency, and autonomy.
This paper reviews the theoretical framework of IFTs, aiming to dissect their objectives,
incentives, and outcomes, and to clarify their classification. A significant contribution
of this study involves new data that tracks IFTs across the OECD, revealing that transfers
from central to subnational governments increased across all countries studied during
the COVID-19 pandemic. While there have been no radical changes in IFTs in recent
years, emerging trends such as performance-based grants, Ecological Fiscal Transfers,
links with regional policy, and new budgeting techniques suggest potential avenues
for reform. By understanding the present dynamics and trends, this study aspires to
pave the way for more informed, strategic, and beneficial fiscal transfer policies
in the years to come, ensuring that these transfers continue to serve their intended
purposes effectively while adapting to changing economic and social conditions across
OECD countries.
Title under embargo until July 22, 2024 05:00 GMT+00:00
In series:OECD Working Papers on Fiscal Federalismview more titles