Edited by Ehtisham Ahmad and Giorgio Brosio
Chapter 9: Governance and institutions: the role of multilevel fiscal institutions in generating sustainable and inclusive growth
Differences in political ideology might lead to different views about the role of the state in the provision of public services across countries, or even in the same country over time. At the same time, it is clear that effectiveness of institutions associated with the generation and use of public resources varies considerably across countries. Despite the nominal presence of institutions that resemble best practice, many countries have difficulties in effectively generating public resources and ensuring that the generated resources are not misappropriated or badly utilized. Political choices at each level of government matter, and incentives facing officials and politicians determine whether an appropriate environment is created for sustainable investment. Institutions do not operate in a vacuum, and the context in which the organizational structure is established may lead to very different results in Mexico as opposed to a similar structure in Brazil or China. This is because incentives matter, and the balance of power and influence of elites, including bureaucracies, may determine whether or not an organizational structure generates rents at the behest of vested interests, especially in societies that North (1990) terms ‘limited access orders’. Thus, attempts by international agencies to propagate ‘best practices’ quite often fail. Sustainable and inclusive growth in multilevel countries depends on creating the right incentive structures for public and private investments, and supporting public service delivery at each level of government.
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