Does fiscal autonomy always fuel financial health in local governments? A cross-country analysis

Silvia Iacuzzi, Emanuele Padovani and Paola Canestrini

Journal of Public Budgeting, Accounting & Financial Management, 2025, vol. 37, issue 6, 370-392

Abstract: PurposeIncreased fiscal autonomy is often identified in studies as leading to improved financial health in local governments, while research finds those depending heavily on funding from other levels of government suffer a decline in financial health.Design/methodology/approachWe analyze financial information from municipalities in nine different countries to gain a more nuanced understanding of this relationship.FindingsOur analysis reveals a more complex picture, in which greater fiscal autonomy may benefit long-term solvency but challenge short-term liquidity and budget stability, potentially impacting overall financial health.Originality/valueOur research reveals that there is no linear relationships between financial autonomy and financial health.

Keywords: Financial condition; Fiscal sustainability; Fiscal stress; Solvency (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jpbafm:jpbafm-10-2024-0215

DOI: 10.1108/JPBAFM-10-2024-0215

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