Granular indicators of fiscal decentralisation from the REGOFI and MUNIFI databases

Abstract Standard measures of fiscal decentralisation often group subnational levels together, concealing differences in regional and municipal public service provision, financial contributions and taxing power. We address this gap by constructing refined granular decentralisation indicators for 22 countries using novel OECD data on regions and municipalities between 2010 and 2021, focusing on actual subnational autonomy over budgetary items. We examine the comparative role of transfers, tax revenues and other own revenue sources in subnational governments’ finance, considering the implications for vertical and horizontal imbalances. Our findings, which complement the existing evidence on fiscal decentralisation based on established data sources, reveal two models of decentralisation: one in which municipalities have significant revenue and expenditure powers, and another in which regions dominate. Notably, while some countries choose not to devolve powers to regions, all maintain at least some degree of fiscal and service provision autonomy at the municipal level. From a policy perspective, our research contributes to the fiscal decentralisation literature by highlighting the importance of distinguishing between regional and municipal governments in a country’s multilevel fiscal structure concerning revenues, public service delivery, and responsibilities.