Does Decentralization Enhance Service Delivery and Poverty Reduction?

Does Decentralization Enhance Service Delivery and Poverty Reduction?

Studies in Fiscal Federalism and State–local Finance series

Edited by Ehtisham Ahmad and Giorgio Brosio

Does decentralization enhance service delivery and poverty reduction? Drawing on cutting edge research, expert contributors address this fundamental question facing policy-makers in developing as well as advanced countries. This timely book builds upon insights on the recent developments in the intergovernmental literature first outlined in the Handbook of Fiscal Federalism. New empirical evidence from across the globe is presented: policy-oriented chapters evaluate fiscal federalism with an emphasis on the effectiveness of decentralized service delivery, the decentralization process in different parts of the world is appraised, and specially commissioned research focuses on the political economy process and the outcomes of the decentralization process. The role of international agencies, as explicit donors, is examined in several chapters.

Chapter 5: The Politics of Partial Decentralization

Shantayanan Devarajan, Stuti Khemani and Shekhar Shah

Subjects: economics and finance, public finance


* Shantayanan Devarajan, Stuti Khemani and Shekhar Shah 1 INTRODUCTION Despite its promise of achieving a better match between local preferences and public goods, decentralization—be it fiscal, administrative or political—has achieved decidedly mixed results. The reasons for this mixed outcome are many, but fall into two categories. One category assigns blame to the design of the decentralization. For instance, some governments decentralize only one or two of the trio of “funds, functions and functionaries”. In Pakistan, responsibility for education was transferred to the districts but teachers remained employees of the provincial government (World Bank, 2004b). Within one of the trio (say functions), there are often mismatches. In South Africa, expenditure responsibility for health, education and social security has been devolved to provincial governments without the corresponding revenue responsibility (Ahmad et al., 2006). In Brazil, it was the reverse—devolved revenue responsibility without expenditure authority. The second category of reasons for the mixed results has to do with the fact that, even with appropriate design, decentralization in practice has turned up a host of problems. The two most commonly identified ones are (1) that sub-national governments do not receive the funds they are due in order to discharge their responsibilities (World Bank, 2004a) and (2) sub-national governments often lack the capacity to manage their newly given financial responsibilities (some local governments in Ethiopia lacked enough numerate and literate people to manage their finances). In this chapter, we show that the problems with decentralization in practice stem from a somewhat under-emphasized...

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