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The United States, China, and Russia share some features: large populations, large land areas, and historical pressures for decentralization in governance. The United States and Russia are formally federal countries, and China in many ways behaves as though it is a fiscal federalism. In the past few years, all three countries have undergone substantial changes in their intergovernmental systems, and central governments in all three countries are under fire from lower-level governments.

Many observers would see intergovernmental fiscal relations in the United States vs. Russia and China, as being so different as to be incomparable. Likewise, it might be argued that the same theoretical model cannot explain changes in central-local relations in a capitalist transition and socialist economy. The objective of this paper is to compare the systems of intergovernmental fiscal relations in these three countries and to ask whether the theory of fiscal federalism can explain the differences and similarities in the structures of tax and expenditure assignment, and the recent trends that have occurred. The next section deals with the theoretical model, that is, the reasons why one would expect more or less decentralization in government finance from countries such as these. I then tum to a description of each of the fiscal systems and recent trends in each country, and finally to some attempt at explaining the impacts and potential reasons for these changes.


Published in Macroeconomic Management and Fiscal Decentralization. Edited by Dulce Afzal and Jayanta Roy, 73-101. The World Bank EDI Seminar Series, 1995.

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