H72 - State and Local Budget and ExpendituresReturn

In the Czech Republic municipalities are seen, in accordance with the Constitution, as the basic element of local government; their roles, tasks and operations governed by the relevant legal regulations. Municipalities have lower powers to raise taxes and so their incomes are largely dependent on transfers from the state budget. The aim of this text is to investigate the possible dependence of indebtedness (expressed as debt per capita) on the size of the municipality (according to the number of inhabitants) and the fragmentation of local government (measured with the aid of the Herfindahl-Hirschman Index). We examined this dependence in data on the statutory cities of the Czech Republic, using the methods of correlation analysis and the chi-squared test. However on the basis of the results we can state that the only statistically significant correlations are between debt per capita and the size of the city, while all the other results were statistically insignificant.

The objective of the paper is to evaluate the role which the multi-year budget outlook has in the budgetary process and to explore its usage in the Czech municipalities. The analysis is based on the published multi-year budget outlooks in 131 Czech towns with more than 10 thousand inhabitants and two case studies. Compilation of the multi-year budget outlook in the Czech Republic is compulsory and its legal regulation allows a broad range of existing practice. Only about a half of the towns publishes a valid multi-year budget outlook on the Internet. The time span of the documents is evenly distributed between two to five years and the detail differs considerably. While four towns prepare the whole budget in a multiannual perspective, about a third of the multi-year budget outlooks contains only the major types of revenue and expenditure. More than one quarter of the published multi-year budget outlooks is prepared by external consultants. The lack of regular update and high uncertainty about future revenue significantly limit the information value of the document.

The article investigates the impact of fiscal decentralisation on a long-term economic development. The aim of the article is to examine and quantify influence of fiscal decentralisation on output in the European Union in the period 1995-2012. The empirical evidence (based on data taken from OECD Fiscal Decentralisation Database and OECD) is performed on a panel which contains 21 countries. Methodology is applied in accordance to Blöchliger (2013), but explanatory variables are not examined in individual regressions, but the analysis newly uses Generalized Method of Moments (Dynamic Panel Data). For a model specification, Dynamic Panel Data Model Wizard is applied. Results of dynamic panel analysis suggest positive impact of expenditure decentralisation, negative effect of revenue decentralisation and negative but statistically insignificant impact of tax decentralisation on economic development. Based on the empirical results, the study suggests that sub-central governments should be given more autonomy and authority in fiscal expenditure matters. These findings are interesting as central governments must often face to tendence of sub-central governments to increase revenue fiscal decentralisation over the last years.