The term ‘fiscal federalism’ is one of the rather wide-spread concepts of the modern society. Fiscal federalism is an essential subfield of the public economics. To provide the most clear definition for this term, it will be right to say that fiscal federalism concerns the question of which tasks and instruments are centralized in the best way and which functions are positioned in the best way in the area of decentralized government levels.
Both in the developed countries and in the countries of the Third World, nations are directing their forces to the further improvement of the public sectors’ performance. To talk about the leader of the world economics, the United States of America, they have taken much effort to work out a wide variety of various social programs, such as: Medicaid, housing, welfare etc. The point is that government will become closer to the people and will heed the voice of the people concerning the improvement of these services rendering.
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An integral part of the fiscal federalism organization is the system of transfer payments, by means of which the lower authorities’ levels receive finances or grants from the central government. It is important to note, that the notion of fiscal federalism is related to different kinds of government. But the point is that it doesn’t mean all authorities’ forms are ‘fiscally’ federal. The thing is that ‘fiscal federalism’ represents a number of principals, which can be referred to any country in the world, aiming at ‘fiscal decentralization’.
In the other words, fiscal federalism can be called broad normative outline of the functions’ projects to the different government levels and proper economic mechanism to accomplish the set of these functions.