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 7: Decentralization in Bolivia: Has it Made a Difference?

Gabriela Inchauste

Subjects: economics and finance, public finance


Gabriela Inchauste* INTRODUCTION 1 Decentralization has been promoted as an instrument for improving service delivery in the sectors that are crucial for poverty alleviation, and Bolivia has been quoted as one of the main examples in support of the proposition (Faguet, 2004). A main argument for this is that local authorities are better able to understand and address local needs. With this in mind, the international community has given a boost to the decentralization process around the world by transferring savings obtained from recent debt relief initiatives directly to local governments in poor countries, and Bolivia again was one of the first cases to benefit from this support. However, recent experience across developing countries has often found that lack of local capacity, misalignment of responsibilities and lack of accountability have implied that the hopes raised by the decentralization paradigm have fallen short of its promises.1 This chapter reviews the detailed data to present a fresh perspective on what has actually happened in Bolivia. Bolivia was one of the first countries to participate and receive debt relief under both the original Heavily Indebted Poor Countries (HIPC) and the enhanced-HIPC initiatives, and more recently under the Multilateral Debt Relief Initiative (MDRI). The HIPC initiative was designed to reduce to sustainable levels the debt burden of highly indebted poor countries. Participating countries received substantial debt relief in exchange for continued efforts in macroeconomic stabilization, structural reforms and poverty reduction. The enhanced-HIPC initiative, in particular, put a greater focus in directing the savings from...

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