Intergovernmental fiscal transfers are among the most powerful, and least visible, instruments in multilevel governance systems. They shape how resources flow across levels of government, determine the fiscal space available to local authorities, and influence incentives for accountability, participation, and service delivery. Yet despite their centrality to decentralization reforms, fiscal transfers are often treated as technical tools rather than as deeply political mechanisms.
The open-access volume Local government and fiscal transfers: Enhancing or weakening democracy? addresses this gap head-on. Edited by Juraj Nemec, Michal Plaček, and Purshottama Sivanarain Reddy, the book offers a comparative and empirically grounded examination of how intergovernmental fiscal transfers affect local democratic governance across a wide range of country contexts.
Rather than assuming that fiscal decentralization automatically strengthens democracy, the contributors ask a more difficult and ultimately more useful question: under what conditions do fiscal transfers enhance local democracy, and when do they risk weakening it?
Among other metrics, the authors rely on LPSA’s LoGICA framework to systematically evaluate the multilevel governance structure and fiscal arrangements of municipalities, and to link fiscal autonomy with local democratic competition and accountability.
Fiscal transfers as political instruments
A central contribution of the book lies in its framing of fiscal transfers not merely as funding mechanisms, but as political instruments embedded in broader systems of power, incentives, and accountability. Transfers determine not only how much money local governments receive, but also how predictable that funding is, how much discretion local officials enjoy, and to whom they are ultimately accountable.
Across the chapters, the authors show that transfers can strengthen local democracy when they expand genuine local fiscal autonomy, support meaningful local decision-making, and are governed by transparent and rule-based allocation systems. At the same time, the book documents how poorly designed transfer systems can entrench fiscal dependency, enable political manipulation from the center, and weaken incentives for local revenue mobilization and citizen accountability.
This tension runs throughout the volume and serves as a reminder that decentralization is not simply about moving resources downward, but about reshaping relationships between levels of government.
Lessons from comparative country experiences
One of the book’s major strengths is its comparative reach. The volume brings together country chapters The book includes dedicated country chapters on Albania, the Czech Republic, India, Indonesia, Japan, Lithuania, the Philippines, the Slovak Republic, South Africa, Sweden, and Uganda, illustrating how similar fiscal instruments can produce very different democratic outcomes depending on institutional capacity, political context, and governance traditions.
In countries with strong administrative systems and established accountability mechanisms, fiscal transfers often reinforce local planning, professional administration, and citizen trust. In contrast, in settings where local capacity is weak or where political competition is highly centralized, transfers may be used strategically to reward allies, discipline opponents, or recentralize control in practice, even when decentralization exists on paper.
Several chapters demonstrate that heavy reliance on intergovernmental transfers can reduce incentives for local governments to mobilize own-source revenues, weakening the fiscal social contract between citizens and local authorities. Others highlight how unpredictable or discretionary transfers undermine local budgeting processes and long-term investment planning, with direct implications for service delivery and democratic credibility at the local level.
Taken together, these case studies underline a core message: the democratic impact of fiscal transfers cannot be understood in isolation from broader governance systems.
What this means for decentralization policy and practice
For decentralization practitioners and policymakers, the book offers a clear warning against overly technocratic approaches to intergovernmental finance reform. Designing transfer formulas, grant conditions, or equalization systems is not simply an exercise in fiscal arithmetic. It is an exercise in institutional design with profound consequences for democratic accountability, political incentives, and intergovernmental trust.
The volume also reinforces the importance of complementing transfer systems with investments in local capacity, transparency, and oversight. Fiscal transfers are most likely to support democratic local governance when local governments have real discretion, when citizens can see and understand how resources are allocated, and when accountability mechanisms operate both vertically and horizontally.
In this sense, the book aligns closely with ongoing debates in the decentralization community about making the “invisible” aspects of intergovernmental finance more visible to citizens, voters, and local leaders alike.
Why this book matters now
At a time when many countries are reassessing decentralization reforms amid fiscal pressures, political polarization, and growing demands for local service delivery, Local government and fiscal transfers: Enhancing or weakening democracy? provides timely and grounded insights. It moves the conversation beyond abstract claims about the virtues of decentralization and toward a more nuanced understanding of how fiscal design choices shape democratic outcomes on the ground.
For researchers, practitioners, and advocates working on decentralization, multilevel governance, and intergovernmental finance, this book is a valuable resource. Its open-access format further strengthens its contribution, making rigorous comparative evidence available to policymakers and local government actors who are often excluded from academic debates.
If decentralization is ultimately about bringing government closer to people, this volume reminds us that how money moves across levels of government may matter just as much as where formal authority resides.
Read the open access book: Juraj Nemec, Michal Plaček, and Purshottama Sivanarain Reddy. 2026. Local Government and Fiscal Transfers: Enhancing or Weakening Democracy?, Springer. https://link.springer.com/content/pdf/10.1007/978-3-031-95674-4.pdf
Note: The Feature Image for this blog post was prepared using AI.
