The Palestinian Economy. Theoretical and Practical Challenges

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Proceedings “The Palestinian Economy: Theoretical and Practical Challenges” 253 where OSRi represents for the own sourced revenue for subnational region i; Ei represents for the expenditure made by subnational region i; AF represents the adjustment factor; and N is the number of subnational regions. SNGs operate closely to local inhabitants so that they are the sole agents, who are in the best position to understand preferences, tastes and amount demanded. It is clear that levels of goods and services provided should not be exceeded the amount demanded by the community. This can avoid both under or overprovision of public goods and services. Moreover, a system of fees, users’ charges can be considered useful and effective for the purpose of cost recovered (McLure and Martinez-Vazquez 2004). The larger the portion of the total public spending cake attributable to SNGs, the higher the degree of fiscal importance and the more likely it is that the benefits from the law of subsidiarity will be realised. Consequently, the relative level that represents the fiscal importance of SNGs is defined as: FI N i1 E TE i [2.2] where TE represents total public sector expenditures of the whole economy (including both expenditures from the national government and all SNGs). The notions of fiscal autonomy [equation (2.1)] and fiscal importance [equation (2.2)] of SNGs may need to be used simultaneously to establish a reliable index of fiscal decentralisation. Such fiscal decentralisation index, as developed in Vo (2005), is: N N OSR E i i i1 i1 FDI FA AF N TE E i i1 (A) (B) [2.3] where OSRi represents for the own sourced revenue for subnational region i; Ei represents for the expenditure made by subnational region i; AF represents the adjustment factor for the country and 0 AF 1; TE represents total public sector expenditures of the whole
254 Zagha economy (including expenditures from the national government and all SNGs); and N is the number of subnational regions. As components (A) and (B) are to be both positive fractions, and 0 AF 1, we can conclude that FDI will also be a positive fraction. Also, the higher the value of FDI, the more fiscally decentralised is the country. Figure 1 shows the FDI for selected developed and developing countries. Source: IMF, Government Finance Statistic Yearbooks, selected years. Quoted in Vo, October 2006, p. 8. The figure shows a tendency that developed countries have higher FDI than developing countries. However, some developed countries (China, Argentine, Brazil, and India) are proven to have more decentralised structure than some developed countries (France, Netherlands and the UK). 3. The Critique of the Traditional Theory of Fiscal Federalism Bardhan (2002) suggested that the institutional context (and therefore the structure of incentives and organisation) in developing and transition economies is quite different from those in advanced industrial economies, and this necessitates the literature on decentralisation in the context of development to go beyond the traditional fiscal federalism literature.
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Page 3 and 4: © Gianni Vaggi - Marco Missaglia -
Page 6: VOLUME II
Page 9 and 10: 246 Zagha 1. Introduction The local
Page 11 and 12: 248 Zagha and groups in political d
Page 13 and 14: 250 Zagha drawbacks in the politica
Page 15: 252 Zagha it is not surprising that
Page 19 and 20: 256 Zagha social norms sharply dist
Page 21 and 22: 258 Zagha Bird (1995) puts it, info
Page 23 and 24: 260 Zagha intergovernmental fiscal
Page 25 and 26: 262 Zagha low rate flat tax levied
Page 27 and 28: 264 Zagha need to be given access t
Page 29 and 30: 266 Zagha Such failures are found i
Page 31 and 32: 268 Zagha 4.1.3. The Relationship b
Page 33 and 34: 270 Zagha a final account report of
Page 35 and 36: 272 Zagha 4.1.6. Functions of LGUs
Page 37 and 38: 274 Zagha • Management of LGU ass
Page 39 and 40: 276 Zagha Figure 2: Local Governmen
Page 41 and 42: 278 Zagha In summary, what the data
Page 43 and 44: 280 Zagha on the cash basis. Almost
Page 45 and 46: 282 Zagha Figure 7: Business Opinio
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Page 49 and 50: 286 Zagha Table 5: Number of NGOs i
Page 51 and 52: 288 Zagha Fiscal decentralisation i
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Assessing the Causes of Inequality
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424 Olivera provisions - in particu
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430 Olivera costs and lower market
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The Palestinian Economy. Theoretical and Practical Challenges

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