The Development of Local Public Finance System in Denmark

Kurachi Shintaro, Meiji University

This study examines the historical development of the local public finance system in Denmark, aiming to clarify the control of tax rates and expenditures, the state of autonomy, and the effects of equalization from the perspectives of institutional change and the welfare state. Denmark is known, like other Nordic countries, for its high welfare and high burden system. It also adopts a decentralized system and is a unitary state with a high ratio of own-source revenues. However, there is a cooperative mechanism for adjusting the autonomy of local governments within the local public finance system. In Denmark, there is a budget coordination system where local government representatives negotiate with the state to secure funding. Specifically, the budget coordination system has played a crucial role in three areas. First, it has been instrumental in maintaining a decentralized yet cooperative local fiscal system. Danish local governments have strong tax autonomy while significantly mitigating the downsides of tax competition, and the diversity in expenditures and tax rates among municipalities is maintained due to the coordination system. Second, the ability to maintain and improve the salary and treatment of care workers and teachers is due to the functioning negotiation and agreement system between cross-industry unions and local government representative organizations, with corporatist funding security being a characteristic of Denmark. Third, the maintenance of interpersonal social services by local governments amidst the increasing prominence of immigration issues since the 2000s is partly due to the strong influence of social democracy in local government politics, facilitated by a solid cooperative relationship among local governments. Therefore, this paper analyzes the development of the local fiscal system in Denmark from the 1970s to the 2020s to reveal how the local fiscal system is responding as globalization progresses, EU integration advances, and regional disparities widen.

No extended abstract or paper available

 Presented in Session 49. Comparative and Historical State Formation