Measuring Fiscal Decentralisation: An Entropic Approach

Duc Hong Vo ()
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Duc Hong Vo: UWA Business School, University of Western Australia

No 06-28, Economics Discussion / Working Papers from The University of Western Australia, Department of Economics

Abstract: Fiscal decentralisation has attracted attention from government, academic studies, and international institutions with the aims of enhancing economic growth in recent years. One of the difficult issues is to measure satisfactorily the degree of fiscal decentralisation across countries. This study helps resolve the problem by developing the fiscal decentralisation index which accounts for both fiscal autonomy and fiscal importance of subnational governments. While the index is an advance on current practice, it is still not perfect as it assumes there is no dispersion of revenue and expenditure across regions. In response to this weakness, fiscal entropy and fiscal inequality measures are developed using information theory (Theil, 1967). It is shown how fiscal inequality can be decomposed regionally and hierarchically. These ideas are illustrated with Australia data pertaining to federal, state and local levels of governments.

Keywords: Fiscal Decentralisation; Fiscal Autonomy; Fiscal Importance; Australia (search for similar items in EconPapers)
JEL-codes: H77 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2006
New Economics Papers: this item is included in nep-cba, nep-pbe and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:uwa:wpaper:06-28

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