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Fiscal Federalism in Bosnia-Herzegovina: Subsidiarity and Solidarity in a Three-Nation State

Author: WILLIAM FOX AND CHRISTINE WALLICH
Published in PFM, Vol. 3 No. 4

The Dayton agreement included a carefully designed
intergovernmental structure in the plan for bringing the hostilities in
Bosnia and Herzegovina to an end. This paper describes the resulting
high degree of subsidiarity in the government and investigates its
consequences. The very devolved government structure combined with
the sociological federalism in operation have resulted in inefficiencies
in service delivery, diseconomies of small scale, and large horizontal
imbalances, at least in the short run. Further, the highly decentralized
government, though essential to reaching an initial agreement, does not
appear to have enhanced the prospects for solidarity. Still, pressure
from the international community, and specifically the EU, together
with the recommendations identified in this paper are important steps
in fostering nationhood for Bosnia and Herzegovina.

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