Subnational government (SNG) expenditure stood at USD 6 450  per capita on average in the OECD area, accounting for 17% of gross domestic product (GDP) and 40% of total public expenditure in the OECD in 2014 ().

The importance of subnational governments (SNGs) in the economy is particularly evident when considering their role as employers. Staff spending is the largest expense in SNG budgets, representing on average 36% of expenditure in the OECD area, and ranging from less than 20% in New Zealand to more than 50% in Norway (). High budget shares for staff spending may reflect the fact that SNGs in several countries have the responsibility, delegated from the central government, for the payment of public workers’ salaries, such as teachers, medical staff or social workers. On average in the OECD area, SNGs undertook 63% of public staff expenditure in 2014. This average masks different situations between federal countries (76%) and unitary countries (45%), from less than 10% in Greece and New Zealand to more than 84% in Switzerland and Canada ().

The breakdown of subnational expenditure by economic function provides a measure of subnational governments (SNGs) role in economic functions. Education represents the largest sector in the SNG expenditure, on average 25% of SNG expenditure in the 28 OECD countries where data were available in 2013. In the Slovak Republic, Slovenia, Estonia, Israel, Iceland and the Czech Republic, spending on education exceeded 30% of local budgets, and in the Slovak Republic was 44% ().

The subnational spending by sector provides a standard measure of the distribution of spending responsibilities among the different levels of government in a country. However, spending indicators should be interpreted with caution, as they tend to overestimate the level of decentralisation. Subnational governments (SNGs), for example, may be responsible for a certain economic function but not have full autonomy in exercising them (see for details).

In most OECD countries, subnational governments (SNGs) have a key role in public investment. In 2014, they carried out around 59% of public investment in the OECD area. This ratio tends to be higher in most federal countries where it combines investments by the states and by local governments. In 2014, more than 70% of public investment was made by SNGs in Germany, Australia, Mexico, Japan, Belgium, up to 95% in Canada ().

In 2014, subnational government (SNG) revenue represented around USD 6 240 per capita, i.e. 16.0% of gross domestic product (GDP) and 42.3% of public revenue on average in the OECD.

The financial and economic crisis led to a strong deterioration in both subnational government (SNG) budget balance and debt in most OECD countries. At the end of 2014, SNG fiscal balance was about -0.5% of gross domestic product (GDP) on average in the OECD. Outstanding gross debt accounted for 23.9% of GDP and 19.8% of total public debt ().

The OECD and the EU Committee of the Regions conducted a survey in 2015 to assess the challenges linked to infrastructure investment at the local level across Europe. The results of the consultation show that governance challenges for infrastructure investment are prominent at the subnational level, essentially at the planning stage, and that all levels of government should do more to strengthen the capacities of subnational governments (SNGs) to conduct proper investment strategies. Some of the key findings are summarised below.