Article thumbnail


By Julia Darby, V. Anton Muscatelli and Graeme Roy


This paper contributes to the established literature on fiscal consolidations (e.g. Alesina and Perotti, 1995, 1997, Alesina et al, 1998) by investigating the distinct behaviour of central and sub-central tiers of government during general government consolidation attempts. In the light of different degrees of decentralisation across OECD countries, and the different responsibilities devolved to sub-central tiers, we believe that this approach offers an illuminating insight into the analysis of fiscal consolidations and their success. We show that the involvement of the sub-central tiers of government is crucial to achieving cuts in expenditure, particularly in relation to the overall size of the government wage bill. In addition, central governments appear to exert a strong influence on the expenditure of subcentral tiers through their grant allocations, and control of these allocations appears to have a considerable impact upon the overall success of consolidation attempts. Finally we demonstrate that there is a skewness in cuts towards sub-central capital expenditure both when central governments cut grant allocations and when sub-central governments engage in lone consolidation attempts.

OAI identifier:

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.

Suggested articles


  1. (1990). Can severe Fiscal Adjustment be Expansionary –
  2. (1989). Credibility, Debt and Unemployment: Ireland’s Failed Stabilization”,
  3. (2000). Exchange Rates and Fiscal Adjustments: Evidence from the OECD and Implications for EMU”, UCLA mimeo, available from
  4. (1997). Fiscal Adjustment in OECD Countries: Composition and Macroeconomic Effects”,
  5. (2001). Fiscal Consolidation in Europe: Pre- and Post- Maastricht”, Kiel Working Paper, Number 1028,
  6. (2003). Fiscal Decentralisation in Europe: A Review of Recent Experience” in Regional Public Finance, European Research in Regional Science 13, edited by Jan Mønnesland , (Pion: London), forthcoming Summer.
  7. (1995). Fiscal Expansions and adjustments
  8. (2001). Fiscal Improvement in Advanced Economies: How Long will it Last?”, World Economic Outlook, Chapter III,
  9. (1999). Indicators of the Cyclically Adjusted Budget Balance”, Paper presented at
  10. (1977). Intergovernmental Grants: A Review of the Empirical Literature”,
  11. (2002). IV. Fiscal Sustainability: The Contribution of Fiscal Rules”
  12. (2001). Measuring the Levels of Decentralisation: The Strengths and Weaknesses of the Government Finance Statistics”, World Bank Decentralisation.Net mimeo,
  13. (2002). On the Measurement and Impact of Fiscal Decentralization”,
  14. (2001). Pitfalls on the Road to Fiscal Decentralization”, Carnegie Endowment for International Peace Working Paper, 19, Washington DC: Carnegie Endowment.
  15. (1989). Political and economic determinants of budget deficits in the industrial democracies”,
  16. (2002). Public Finances in EMU”, European Economy, Number 3/2002,
  17. (2002). Reviving Leviathan: Fiscal Federalism and the Growth of Government”, forthcoming International Organization
  18. (2000). Searching for Non-Linear Effects of Fiscal Policy: Evidence from Industrial and Developing Countries”,
  19. (2002). Structural Balances and All That: Which Indicators to Use in Assessing Fiscal Policy”, IMF Working Paper, Number WP/02/101, International Monetary Fund:
  20. (2002). Structural change in fiscal policy and the permanence of fiscal contractions - the case of Denmark and Ireland”, Department of Economics Working Paper 2002:11,
  21. (1993). Suggestions for a New Set of Fiscal Indicators”,
  22. (1999). Taxing Powers of State and Local Government”,
  23. (1996). The Experience with Fiscal Consolidation
  24. (1997). The Irish Expansionary Fiscal Contraction: A Tale From One
  25. (1994). The Political Economy of Budget Deficits”,
  26. (1999). The Relevance of Cyclically Adjusted Public Balance Indicators - The French Case”,
  27. (1991). Why are stabilisation’s delayed?”,