RomaniaWinners and Losers

Research Report

RomaniaWinners and Losers

The Impact of Reform of Intergovernmental Transfers

Abstract

This report analyzes the distributional impact of Romania's 1999 Law on Local Public Finance, and makes recommendations for ameliorating its adverse effects. By providing a stable revenue source for municipalities, this law improves the investment planning and financial management capabilities. However, in a survey of local councils, the authors find that the law tends to favor councils with strong revenue-collecting capacity and wealthier tax bases. The councils that lack these attributes witnessed a serious decline in their revenue sources. The report makes a series of recommendations for how to counter the negative distributional effects of an otherwise commendable law.

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