Budgetary Institutional Adjustments and Fiscal Discipline in Local Government: An Assessment of Entity Location Mediation

Year 2019, Volume: 4 Issue: 1, 1 - 22, 30.07.2019

Paul Onyango-delewa , İsaac Nabeta Nkote

https://doi.org/10.30927/ijpf.478638

Abstract

For
quite a long time, budgetary institutional adjustments have been implicated as
important determinants of fiscal discipline in local government. Moreover,
entity location has been argued a pivotal and influential factor in the
budgetary institutional adjustments-fiscal discipline linkages. However, to
date no research is conclusive enough on what precisely explains budget
discipline especially in Sub-Saharan Africa-based localities. On the basis of a
cross-sectional research design, this study investigated the budgetary
institutional adjustments-entity location-fiscal discipline triangulation in Uganda,
East Africa. Data were collected from 26 districts, 9 municipalities and a
number of sub-counties spread across four purposively-selected geographical regions
of the country. The regions are north-western, northern, north-eastern, and
eastern. Data were then subjected to both regression and structural equation
modeling statistical analysis. Notably, results from structural equation
modeling revealed that budgetary institutional adjustments have strong
predictive power on fiscal discipline. Conversely, entity location does not
have any influence on the budgetary institutional adjustments-fiscal discipline
relationship. Theoretical and practical implications from the findings are
discussed.

Keywords

Fiscal Discipline, Budgetary Institutional Adjustments, Location

Budgetary Institutional Adjustments and Fiscal Discipline in Local Government: An Assessment of Entity Location Mediation

Abstract

For quite a long time, budgetary institutional adjustments have been implicated as important determinants of fiscal discipline in local government. Moreover, entity location has been argued a pivotal and influential factor in the budgetary institutional adjustments-fiscal discipline linkages. However, to date no research is conclusive enough on what precisely explains budget discipline especially in Sub-Saharan Africa-based localities. On the basis of a cross-sectional research design, this study investigated the budgetary institutional adjustments-entity location-fiscal discipline triangulation in Uganda, East Africa. Data were collected from 26 districts, 9 municipalities and a number of sub-counties spread across four purposively-selected geographical regions of the country. The regions are north-western, northern, north-eastern, and eastern. Data were then subjected to both regression and structural equation modeling statistical analysis. Notably, results from structural equation modeling revealed that budgetary institutional adjustments have strong predictive power on fiscal discipline. Conversely, entity location does not have any influence on the budgetary institutional adjustments-fiscal discipline relationship. Theoretical and practical implications from the findings are discussed.

Keywords

Fiscal Discipline, Budgetary Institutional Adjustments, Location

References

• Alesina, A., Hausmann, R., Hommes, R. & Stein, E. (1999). “Budget Institutions and Fiscal Performance in Latin America”. Washington: IDB OCE, Working Paper 394.Alesina, A. & Perotti, R. (1996). “Fiscal Discipline and the Budget Process”. American Economic Review, 86(2), pp. 401-407.Altunbas, Y. & Tornton, J. (2012). “Fiscal decentralization and governance” in Public Finance Review, 41 (1), pp. 66-85.Bahl, R. & Bird, R. (2008). “Subnational taxes in developing countries: The way forward”. Public Budgeting and Finance, 28(4), pp. 1–25.Baruch, Y., & Holtom, B. C. (2008). “Survey response rate levels and trends in organizational Research”. Human Relations, 61, pp. 1139–1160.Beran, R., & Srivastava, M. S. (1985). “Bootstrap tests and confidence regions for functions of a covariance matrix”. Annals of Statistics, 13, pp. 95–115.Bird, R. (2011). “Subnational taxation in developing countries: A review of the literature”. Journal of International Commerce, Economics and Policy, 2 (1), pp. 139-161Blom-Hansen, J. (1999). “Policy-making in central-local government relations: Balancing local autonomy, macroeconomic control, and sectoral policy goals”. Journal of Public Policy, 19(3), pp. 237-264.Bollen, K. A., & Stine, R. A. (1992). “Bootstrapping goodness-of-fit measures in structural equation models”. Sociological Methods & Research, 21, pp. 205–229.Bradford, D. & Oates, W. (1971). “The analysis of revenue-sharing in a new approach to collective fiscal decisions”. Quarterly Journal of Economics, 85, pp. 416–439.Ebel, R. & Taliercio, R. (2005). “Subnational tax policy and administration in developing economies”. Tax Notes International, 37 (1), pp. 919–936.Fjeldstad, O-H. (2006). “Local revenue mobilization in urban settings in Africa”. in Millett, K.; Olowu, D. & Cameron, R. (eds): Local governance and poverty reduction in Africa (Tunis, Tunisia: Joint Africa Institute), pp. 105-126.Krogstrup, S. & Wyplosz, C. (2006). “A common pool theory of deficit bias correction”. European Economy, 275, pp. 1-29.Marsh, H. W., Hau, K.T. & Wen, Z. (2004). “In search of golden rules: Comment on hypothesis-testing approaches to setting cut-off values for fit indexes and dangers in overgeneralizing Hu and Bentler's (1999) findings”. Structural Equation Modeling: A Multidisciplinary Journal, 11(3), pp. 320–341.Ministry of Local Government. (2017). “Annual Report”. Government Printers, Entebbe, Uganda.Olowu, D. (2003). “Local institutional and political structure and processes: Recent experience in Africa”. Public Administration and Development, 23(1), pp. 41-52.Poterba, J. (1994). “State responses to fiscal crisis: The effects of budgetary institutions and politics”. Journal of Political Economy, 102(4), pp. 799-821.Preacher, K. J., Zyphur, M. J., & Zhang, Z. (2010). “A general multilevel SEM framework for assessing multilevel mediation”. Psychological Methods, 15, pp. 209–233.Rodden, J. (2002). “The dilemma of fiscal federalism. Grants and fiscal performance around the world”. American Journal of Political Science, 46 (3), pp. 670–687.Scandura, T. A., & Williams, E. A. (2000). “Research methodology in management: Current practices, trends, and implications for future research”. Academy of Management Journal, 43, pp. 1248–1264.Simonton, D. K. (2003). “Qualitative and quantitative analyses of historical data”. Annual Review of Psychology, 54, pp. 617–640.Tiebout, C. (1956). “A Pure Theory of Local Expenditures”. Journal of Political Economy, 64, pp. 416–424.Von Hagen, J. & Harden, Ian J. (1995). “”Budget Processes and Commitment to Fiscal Discipline”. European Economic Review, 39, pp. 771-779.Winer, S. (1980). “Optimal fiscal illusion and the size of government”. Public Choice, 35, pp. 607-622.Yilmaz, S. & Serrano-Berthet, R. (2010). “Linking local government discretion and accountability in decentralization”. Development Policy Review, 28 (3), pp. 259-293.