Principles Guiding Expenditure Assignment:

1. Efficient Provision of Public Services: Local governments, being closer to the population, are best suited to provide services that meet the needs of local residents, ensuring efficiency by covering the minimum geographic area needed for these services.
2. National Equity or Fairness: Redistribution through national programs, such as progressive taxes, ensures equity. Allowing local governments to manage redistribution may drive wealthier residents away.
3. Provision of Quasi-Private Goods: Essential public services (e.g., health, education) that act as quasi-private goods benefit from national oversight, which ensures equity and minimum standards across regions.

Drawbacks of Expenditure Assignment:

1. Lack of Formal Assignment: Absence of formally assigned responsibilities creates fiscal instability and uncertainty, making budget planning challenging for different government levels.
2. Inefficient Assignments: Capital expenditure assignments at the central level often lead to inefficiencies, as local governments, closer to the service demands, lack control over related capital projects​