Local Administration Reform in Estonia: Alternatives from an Economic Point of View

Ralph Wrobel

Post-Communist Economies, 2003, vol. 15, issue 2, 277-295

Abstract: As the Estonian experience with local taxes has turned out in the last decade small rural municipalities have not been able to profit from the right to collect local taxes. Tax collecting and administrative costs have been too high. Therefore the local administrative system did not succeed and developed into a grants-in-aid system during the transition process. But from an allocational point of view such a development is not satisfactory. Incentives for local governments to save taxpayers' money and to seek new industrial establishments intensively are lacking. Only an administrative system characterised by institutional competition can solve these problems. In this article the advantages of institutional competition between local jurisdictions in Estonia are discussed. Additionally, a concrete system of competing enlarged counties is recommended.

Date: 2003
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DOI: 10.1080/14631370308094

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