What is the theory of fiscal federalism?

What is the theory of fiscal federalism?

The theory of fiscal federalism assumes that a federal system of government can be efficient and effective at solving problems governments face today, such as just distribution of income, efficient and effective allocation of resources, and economic stability.

What is fiscal federalism and why is it important?

Fiscal federalism is an economic framework for understanding the relationship among federal, state, and local governments that focuses on the division of spending and taxing powers among these governments. One focus is the division of responsibilities among different types of governments.

How does fiscal federalism work in Ethiopia?

Fiscal federalism in Ethiopia has been adopted within a unique political landscape of ethnic federalism. The TPLF-led government that replaced the Dergue has redrawn the political map of the country and adopted ethnic based federal structure of government. This experiment has been formalized in the 1994 Constitution.

What is the purpose of fiscal federalism?

The field of fiscal federalism studies how to divide responsibilities (including finances) among federal, state, and local governments to improve economic efficiency and achieve various public policy objectives.

What is the second feature of fiscal federalism?

Second generation fiscal federalism (SGFF) builds on FGFF but also studies the fiscal and political incentives facing subnational officials. The FGFF assumption of benevolent maximizers of social welfare ignores the actual goals of political officials who typically must run for election.

What was the purpose of fiscal federalism?

What is budget process in Ethiopia?

Budget Process is a powerful tool in Public finance management for allocating scarce resources to different programs of the State. it is where some of the most important political decisions and activities are made during the year. On the other hand the critical constraints to budget execution, was procurement.

Who determine the formula for regional subsidy?

The formula for the allocation of the subsidies by the federal government to the regional states, called unconditional budget grants, was developed based on the findings of a detailed quantitative assessment of the relative expenditure needs and revenue raising potentials of the regions, according to Shiferaw.

What are examples of fiscal federalism?

Practical examples with implications for fiscal federalism include relative federal, state, and local government activity during economic downturns, spending in policy areas like education and transportation, and the type and total level of taxation present across areas.

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