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 11: Decentralization and Public Service Provision – A Framework for Pro-poor Institutional Design

Regina Birner and Joachim von Braun

Subjects: economics and finance, public finance

Extract

11. Decentralization and public service provision—a framework for pro-poor institutional design Regina Birner and Joachim von Braun* 1 INTRODUCTION The effective provision of basic services, such as water and sanitation, health, education and agricultural extension, is a major challenge for development. In many developing countries, the poor—especially the rural poor—receive poor services in terms of access, quantity and quality (World Bank, 2004). Due to a combination of “supply-side” and “demand-side” factors, rural areas—where most of the world’s poor still live—are particularly disadvantaged in terms of rural service provision: the unit costs to provide services are relatively higher, especially if population densities are low. Rural areas are less attractive for skilled staff, which leads to human resource constraints in service provision. And the rural poor face higher transaction costs than the urban poor in organizing interest groups to demand better services and hold service providers accountable. Among the governance reforms that aim at improving public service provision, one type of reform has attracted particular attention in recent decades: decentralization. Some 80 percent of all developing countries have experimented with some form of decentralization in recent decades (Work, 2002). A common argument in favor of decentralization is that it will improve public service provision, and in particular rural service provision, “by bringing government closer to the people”.1 The classical economics literature on decentralization (Oates, 1972)—the “fiscal federalism” literature—has been relatively favorable to decentralization as well. It stressed the role of differential information at different...

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