Does fiscal autonomy always fuel financial health in local governments? A cross-country analysis

Purpose Increased fiscal autonomy is often identified in studies as leading to improved financial health in local governments, while research finds those depending heavily on funding from other levels of government suffer a decline in financial health. Design/methodology/approach We analyze financial information from municipalities in nine different countries to gain a more nuanced understanding of this relationship. Findings Our analysis reveals a more complex picture, in which greater fiscal autonomy may benefit long-term solvency but challenge short-term liquidity and budget stability, potentially impacting overall financial health. Originality/value Our research reveals that there is no linear relationships between financial autonomy and financial health.