The Flypaper Effect: Do Political Institutions Affect Danish Local Governments’ Response to Intergovernmental Grants?

Abstract

Despite a large number of empirical studies on the flypaper effect, it remains disputed whether the effect exists and to what extent it is asymmetrical. The flypaper effect suggests that intergovernmental grants tend to result in higher increases in public expenditures than a similar increase in citizens’ private income would have led to. An asymmetrical effect exists when the fiscal response differs depending on whether grants are increased or decreased. By considering political institutions that moderate the effect of intergovernmental grants, this article offers a theoretical explanation that accounts for the mixed empirical evidence. The local response to intergovernmental grants is tested using a reform of the Danish intergovernmental grant scheme in 2007. In line with the expectation, the article finds a strong asymmetrical effect, but more surprisingly, this effect is found both when subnational budget institutions are centralised and when they are fragmented.     

CORPORATISM, PAY NEGOTIATIONS AND LOCAL GOVERNMENT

The era of the 'Social Contract' between 1974 and 1979 has been seen as the epitome of 'corporatism' in British government. This article explores the utility of the concept of 'corporatism' for the study of intergovernmental relations, examining pay negotiations in the fire service between 1976 and 1980. It identifies the central characteristics associated with a corporatist system; describes the institutional and procedural context of pay negotiations in the fie service; catalogues the events surrounding the firemen's strike of 1977; and assesses the strengths and weaknesses of corporatism in explaining these events. It concludes that the concept of corporatism has now acquired so many multiple and contiguous meanings that it adds little to the analysis of relationships between government, local government (employers) and the trade unions. Such terms as network, compliance and executive authority are of greater use than the corporatist terminology of hierarchy, regulation and order.     

Mediation in disputes between municipal governments

Emerging forms of intergovernmental management include roles for neutrals in a range of problem solving and conflict management situations. Third party intergovernmental mediation has been used to settle adversarial municipal boundary disputes in Virginia since 1980. Settlements fashioned through mediated negotiations are responsive to local officialst concerns. This paper reports on this innovation.     

Intergovernmental Agreements in Contemporary Russia

ABSTRACT

The paper discusses the evolution and current forms of agreements between federal, regional and municipal governments, as well as between the constituent units of the Russian Federation and municipalities. It analyses the problems and prospects of using these regulatory instruments. The purposes of this paper are to examine the current context of making intergovernmental agreements in Russia, to provide a comprehensive vision of contemporary state of this instrument of shaping intergovernmental relations, and to assess the prospects for their further practical use in the Russian Federation.     

Financing the capital budget: change and transition

The changes in intergovernmental finance which occurred in the 1980s have impacted the traditional roles of state and local governments in many areas. The changing roles of such governments in the financing of infrastructure and public capital investments have been particularly pronounced. Their growing responsibilities in infrastructure finance has led to an enhanced emphasis on capital budgeting and on developing new initiatives in the capital financing arena. This article explores the impact of such changes on the strategies that are and will, probably, be employed by state and local governments to finance future capital acquisitions in a changing economy and intergovernmental fiscal environment.     

INTERGOVERNMENTAL RELATIONS

The field of intergovernmental relations has been strongly affected by the considerable processes of upheaval and change that have been experienced within the British system of central-local relations. Researchers have tried to understand these changes both at an empirical and theoretical level. This article reviews four of the main perspectives on the changing nature of intergovernmental relations. The first perspective provides a historical and institutional analysis within the tradition of public administration. The second perspective draws on organizational theory. The third develops insights through rational choice analysis. The final perspective draws on neo-Marxist influenced state theory. It can be concluded that in a search to understand the turmoil of recent years, students of intergovernmental relations have ranged far and wide in their theoretical concerns. The article closes with an assessment of the advantages and disadvantages of this approach.     

Changes in the Scandinavian Model. From Bureaucratic Command to Interorganizational Negotiation

Scandinavian local government is increasingly changing its organizational pattern away from the principles of local centralized bureaucratic control that were held sacred after the reforms of the 1960s and 1970s - reforms that made local government the building block for the welfare 'state'. Organizational fragmentation is taking place, making room for both new managerial styles similar to those of the New Public Management, featuring contracting out and similar market-like arrangements, and for democratic initiatives which place service users in command of service institutions. Such developments call for new approaches to the study of local government, approaches that take interorganizational relations more directly into account. Suggestions about such an approach are made, based on studies of intergovernmental relations. Distinctions are made between intergovernmental politics which is concerned with symbolic values linked to the status of an organization, and intergovernmental management where processes of making do are seen as most important. In spite of the managerial fashion for strategic goal-setting, it is expected that the new political actors are more interested in day-to-day results and thus challenge politicians, moving them away from the abstract goals in favour of advancing and monitoring actual accomplishments. This increases the need to understand network relations and, in turn, may yield better understanding on the part of citizens of how local politics and management works.     

FISCAL FEDERALISM, PROFESSIONALISM AND THE TRANSFORMATION OF AMERICAN STATE GOVERNMENT

A combination of political and economic forces have helped to return the states to the centre of the political stage. Whether measured by objective indicators (employment, share of government expenditure, elasticity of state revenues) or political institutional changes (the rise of career governors, the increasing influence of the intergovernmental lobby and the spread of state responsibilities), the states have become increasingly important in the formulation and implementation of American domestic policies. However, these changes have by no means reduced the level of intergovernmental conflict. On the contrary, cuts in federal expenditure, the introduction of block grants and public opposition to increases in state and local taxation are likely to intensify debate on distributional questions at the state level.     

The challenge of design of intergovernmental relations in economies in transition

The governments of Eastern Europe and the former Soviet Union are at a crucial juncture in their movement from highly centralized command economies to more decentralized market economies. While there is a belief in these countries that decentralization brings greater economic efficiency, the reality is that such a transition is a difficult process. This paper examines what types of administrative reforms are needed for the decentralization process, how far along the countries are with respect to these reforms, and what reforms are missing. As we discuss, many of the necessary administration reforms are missing and we argue that more attention must be paid to these elements for successful decentralization of these governments.

This paper examines the recent experience and reform needs of the key administrative aspects of the design of intergovernmental relations in countries in transition in Eastern Europe and in the former Soviet Union. There is a widespread realization in all of these countries that decentralizing government will help increase efficiency in the public sector just as privatization will improve efficiency in their economies. Decentralization of government operations is also attractive as a way to cement a democratic form of government. Despite the appearances of the existence of an already decentralized system, such as in the case of the Soviet Union, this experiment started in practically all cases with a lack of institutions and experience on how decentralized government operations should be organized.

As different as these countries are, there are many similarities in the reform process they are following in order to decentralize government structure. While the basic components of a decentralized system of government are emerging in many of these countries the structure of government has not fully evolved in a manner that can support such a decentralized system. Often, governments remain structured along a vertical hierarchy: information, budgetary authority, and revenue pass from the central government down to subnational levels of government while little communication or interaction exists at a horizontal level. In general, the assignment of revenue and expenditure has not been clearly defined among the two or three levels of government, central government transfers continue to occur in a relatively ad hoc manner, and the entire budgeting system still rests in many cases on more or less formal system of negotiations and bargaining among the different levels of government. There has been some change in this structure in certain countries. Over the last three years, both Poland and Hungary have legally increased the automony of subnational governments. In 1994 in Russia a new and more transparent system of intergovernmental grants has been established between the federal government and the regions. In 1994 also, Latvia introduced a more transparent formula-driven, transfer formula for the regional and municipal governments.

The focus of this paper is to develop a “blue print” for necessary changes in organization and administration of intergovernmental relations in countries in transition. While many experts have recently been discussing the public finance policy components of this new, evolving relationship among levels of government, less attention has been paid to the structural and administrative challenges and the information design issues that must be met in order to develop and support a system of intergovernmental relations.

The paper is organized as follows: First we review the major responsibilities and their allocation among levels of government, the assignment of revenue sources, and the system of transfers. We then turn to a discussion of the current experience of Eastern European and NIS countries in the context of the structural components of an intergovernmental fiscal system. Next, we analyze the organizational reforms that are necessary for the efficient functioning of a decentralized system of government in the economies in transition. Finally we “rate” the transition economies in relation to their current design of the system of intergovernmental relations and support mechanisms.     

Inside the Matrix: Integrating the Paradigms of Intergovernmental and Network Management

Abstract

The basic research concepts of intergovernmental and network management are examined with regard to blending the two into a unified theory of collaborative management. A substantial literature in both fields has emerged and is ripe for conceptually enhancing interorganizational management in the public sector. The collaborative management concepts forwarded emanate from the authors' comprehensive study of collaborative public management in 237 cities. The major concerns that are found to be ready for knowledge unification include: (1) multiple network complexity and the emergence of governance through policy networks, (2) strategic behavior and its implementation through networks, (3) the role of government institutions in network governance, and (4) the use of myriad policy instruments and multiorganizational activity. Each of these research arenas are representative of the kind of knowledge base that can be blended and extended to help public managers understand how to operate in the vertical/horizontal matrix of intergovernmental network management.     

How does intergovernmental fiscal environment affect general fund balances of major American cities?

This study explores the extent to which intergovernmental fiscal factors affect fiscal reserves in municipal general funds. Statistical results from panel data of 87 major cities in the US for the period from 1995 to 2010 show that cities facing more restrictive limitations on local property taxation tend to maintain higher levels of unreserved general fund balances. Additional analyses also show that fiscally constrained cities accumulate surpluses in their general funds. This is consistent with the proactive approach in which municipal governments make fiscal decisions with the awareness of expected state constraints on their revenue-raising capacity. We call for consideration of relevant intergovernmental constraints in the determination of appropriate level of fund balances for municipal governments.     

Hardening Budget Constraints: A Cross-National Study of Fiscal Sustainability and Subnational Debt

This study explores the financial sustainability of subnational governments in four different countries. Scholars argue that subnational fiscal capacity helps local governments deliver better public services and provide public goods, which in turn helps to promote economic growth. While administrative control by the central governments contributes to reducing moral hazard from the soft budget constraints, bottom-up strategies to manage fiscal profligacy also need attention. The study first provides understanding about the characteristics of central-local governance and management of subnational government debt of each country. Then, we test our hypotheses regarding local fiscal capacity and administrative control, including political-economic factors that may affect debt spending by local governments. Our findings show that subnational fiscal sustainability improves when the central governments have clear rules to intergovernmental transfers in place and more (market) liberal policies, meanwhile when subnational governments have a more fiscal capacity and less intergovernmental transfers they are able to manage their debt more soundly.     

Intergovernmental redirection

Intergovernmental reformers have long attempted to remedy the system's more apparent defects, especially the recent buildup in federal-state-local relations as Washington's involvement became broader and deeper. These remedies have included incremental and procedural changes, rationalization of federal aid and program delivery instruments, and total overhaul of the system through functional realignment. Efforts in the past have proved only marginally successful, essentially due to the fact that Congress had become the dominant architect and defender of the system. The world of intergovernmental relations changed dramatically from 1978 on, due to the poor performance of the economy, antitax and antispending sentiment, public-sector retrenchment, and fiscal deterioration at the federal level. Decentralization, competition, and fragmentation characterize the contemporary do-it-yourself federalism. President Reagan's proposed swap, turnback, and trust-fund package of New Federalism seeks to capture these changes in a system realignment. I examine these changes in light of whither intergovernmental relations go in the 1980s.     

Inter-Governmental Policy Implementation: State Inducements to Encourage Implementation at the Local Level

This article investigates how State departments can best equip Local government to implement State environmental protection legislation effectively. Research on joint implementation by the then New South Wales Environment Protection Authority and NSW Local government authorities is reviewed to explore inducements and constraints on intergovernmental policy implementation, including the multi-jurisdictional nature of policy.     

The use of intergovernmental grants to municipalities for electoral purposes by subnational governments

Subnational governments devote a significant share of their financial resources to help municipalities provide local public services to their citizens. Compared to the large number of studies on national governments, little effort has been devoted to the influence of distributive politics on the use of intergovernmental grants by subnational governments. To fill this gap, this study uses a data set covering the period 2001–2011 to verify to what extent the Québec government used conditional grants to municipalities for electoral purposes. The results of this study show that the allocation of grants to municipalities is not exempt from electoral politics as municipalities located in districts held by governing parties or in high electoral competition districts receive more grants than other municipalities. However, the influence of electoral politics decreases substantially when the management of intergovernmental grants is under tight scrutiny by the opposition parties, mass media and the population. These findings suggest that distributive politics can be conceptualised as a political agency problem whose prevalence is seriously constrained by the improvement of the transparency of public policies management.     

Globalization,State Autonomy and the Fight against Cross-Border Crime: Greater China's Cooperation with the World

Although globalization has stimulated the rise in cross-border crime, it does not really undermine the autonomy of the mainland Chinese state, the Taiwan state, and the city-states of Hong Kong and Macao. Instead, through cooperation with law-enforcement agencies in other countries, the law-enforcement agencies of these four places, notably the police and customs, have ensured the persistence of state autonomy vis-à-vis cross-border criminal groups and individuals. In the case of Greater China (mainland China, Taiwan, Hong Kong and Macao), interstate cooperation involving the police and customs can maintain state autonomy vis-à-vis criminal groups and individuals. The mechanisms of such interstate and intergovernmental cooperation embrace the sharing of criminal intelligence, the occurrence of anti-crime joint operations, the holding of seminars and conferences, and the administrative arrangements of extraditions. In a nutshell, intergovernmental cooperation in the combat against cross-border crime can maintain state autonomy in the midst of globalization, as the case of Greater China shows.     

Reforming Serbia’s Local Government Finance System*

Abstract

Approximately 30 percent of all local government revenues in Serbia come from shared sales taxes. In the immediate future, the Government will have to replace sales taxes with a value added tax in order to meet EU norms. This will require a fundamental overhaul of Serbia’s intergovernmental finance system because unlike sales tax, the VAT cannot be shared on an origin basis. This paper outlines the origins of Serbia’s current intergovernmental finance system, summarizes its strengths and weaknesses, and then, in light of the necessity of change, sketches a set of reform proposals. These include creating a formula-based equalization grant funded by a fixed percentage of national budget revenues; introducing the legal possibility for block grants, categorical grants, and grants for delegated functions to fund the devolution of new responsibilities to local governments and to support specific (investment) programs; and restoring local government control over Serbia’s ad valorem property tax.     

A Survey of Perspectives on Intergovernmental Relations: A Comparative Analysis of the Czech and Slovak Republics

The results of a survey of local government officials from the Slovak and Czech Republics taken in December of 2005 are presented and analysed. Attitudes about and perspectives on intergovernmental fiscal relations in the two republics are probed. Differences and similarities in Czech and Slovak views are established regarding some of the perceptions of local autonomy and the sufficiency of available funds; whether or not public services are supplied by the appropriate levels of government; the potential benefits of adopting a serious rather than a nominal property tax; and the flexibility of local budget planning in Czech and Slovak cities and towns.     

Legitimacy,Identity and Climate Change: moving from international to world society?

Resource scarcity and climate change could provoke major inter-state and intra-state violence and humanitarian emergencies, an especial threat to the global South. This article examines the dynamics that have followed the major violent crises of the past few centuries to determine whether climate-change-induced conflict might paradoxically generate norms of non-violence and collective identification, and in turn lead to a more co-operative culture of anarchy. Especially since 1945 we have witnessed the development of a ‘security community’ in the North Atlantic—that is, a group of states that not only resolve conflict without resort to violence but also consider war among their members unthinkable. Such communities might develop in other regions in two stages. First, state internalisation of liberal norms of democracy and human rights may enhance the role of intergovernmental organisations in mitigating climate-change-induced conflict. Second, collective identification among states and individuals may be stimulated by structural similarity between increasingly democratic states, the perception of a common fate arising from shared threats, and an expanding global civil society and epistemic communities preoccupied with climate change. Climate change could thus spur movement towards more legitimate and authoritative intergovernmental organisations within a world society that would be more effective at solving common problems than those operating within today's more fragmented international society.