Depending on their administrative structure, central, state and local governments have greater or less autonomy over revenue collection. In 2019, central governments in OECD countries collected on average slightly more than half (53.3%) of general government revenues, state governments collected 21.1%, social security funds 16.2% and local governments 9.1% (Figure 2.30).
Between 2007 and 2019, the composition of revenues in OECD countries changed moderately: on average, central governments’ share of revenue increased by 0.2 p.p. and state governments’ by 1.7 p.p. The share fell for local governments (1.4 p.p.) and social security funds (0.5 p.p.) (Online Figure G.21). Between 2019 and 2020, among OECD-EU countries, central governments’ share increased by 0.9 p.p., local governments’ by 0.1 p.p., while state governments’ share fell 0.2 p.p. and social security funds’ share by 0.8 p.p. These changes need to be understood in context: government revenues overall fell in 2020 due to the COVID-19 pandemic.
Different levels of government are responsible for different functions. For example, central government is usually responsible for foreign affairs and defence, while local governments often provide education and health services. However, different administrative systems allocate spending responsibilities differently and grant more or less autonomy over how resources are used. There are also several government functions that require coordination across governmental levels and that are amenable to different funding arrangements. In 2019, on average, central government carried out 41.3% of public expenditure in OECD countries, state and local governments 38.8%, and social security funds 19.9% (Figure 2.31).
Between 2007 and 2019, the balance has tilted towards social security, albeit with wide variations across countries: on average, the share of social security fund expenditure increased by 1.2 p.p. and central government increased by 0.3 p.p., while sub-central government fell by 1.5 p.p (Online Figure G.22). Between 2019 and 2020, in OECD-EU countries, central government spending increased most (1.2 p.p.) with a slight increase for state governments (0.1 p.p.). These levels have been responsible for most of the financial aid aimed at alleviating the economic effects of the pandemic.
