The global crisis and intergovernmental relations: centralization versus decentralization 10 years on

There is a growing empirical literature on the effects of the global financial and economic crisis on intergovernmental relations. This paper contributes to this literature by focusing on conventional budgetary aggregates and institutional indicators of subnational authority in policy-making and fiscal-financial management. The empirical analysis is carried out for a large set of advanced and emerging-market/developing economies between 1990 and 2015, and it shows that the crisis has been associated with an increase in the subnational shares of general government spending and revenue. The findings for subnational authority over policy and fiscal-financial management are more nuanced and suggest that increases in government indebtedness (spending) since the crisis have been associated with greater (weaker) subnational authority. It is possible that the need to deliver debt reductions through medium-term fiscal consolidation calls for greater intergovernmental coordination, which enhances the bargaining power of the subnational jurisdictions to broaden their prerogatives in fiscal matters and influence national policy-making.