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Size matters: fragmentation and vertical fiscal imbalances in Moldova

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  • Serhan Cevik

    (International Monetary Fund)

Abstract

Using a novel municipality-level panel dataset, this paper investigates the empirical characteristics of vertical fiscal imbalances (VFIs) in Moldova over the period 2005–2013. The results show that the extent of variation in VFIs across 898 municipalities can be explained by the level of per capita income, fiscal capacity, and demographic characteristics, as well as the central government’s fiscal behavior that reflects fiscal constraints and policy preferences at the national level. Political affiliation does not appear to be a significant factor, but the results show lower VFIs when the mayor of a municipality belongs to the same party ruling the central government. Altogether, these findings underscore the need for well-coordinated reforms to create economies of scale, enhance revenue collection, and improve the composition of spending at the subnational level.

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  • Serhan Cevik, 2017. "Size matters: fragmentation and vertical fiscal imbalances in Moldova," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 44(2), pages 367-381, May.
    • Handle: RePEc:kap:empiri:v:44:y:2017:i:2:d:10.1007_s10663-016-9325-7
    DOI: 10.1007/s10663-016-9325-7
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    More about this item

    Keywords

    Vertical fiscal imbalance; Fiscal decentralization; Subnational governments;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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