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Fiscal Decentralization and Local Finance in Developing Countries

Development from Below

Roy Bahl and Richard M. Bird

This book draws on experiences in developing countries to bridge the gap between the conventional textbook treatment of fiscal decentralization and the actual practice of subnational government finance. The extensive literature about the theory and practice is surveyed and longstanding problems and new questions are addressed. It focuses on the key choices that must be made in decentralizing, on how economic and political factors shape the choices that countries make, and on how, by paying more attention to the need for a more comprehensive approach and the critical connections between different components of decentralization reform, everyone involved might get more for their money.
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Chapter 2: Has decentralization worked?

Development from Below

Roy Bahl and Richard M. Bird

Extract

The focus in this chapter is on what the empirical evidence tells us about why countries have decentralized and what the impact of fiscal decentralization has been. We review why the data is limited, but nonetheless note that it suggests some conclusions about why some countries are more decentralized than others, and why decentralization is likely to be more fully developed in larger and higher-income countries than in smaller and poorer countries. However, when it comes to questions about the impact of fiscal decentralization on economic development, on the well-being of the population, and on the size and quality of government, the evidence gives no clear answers. Decentralization appears have had some positive impacts in some countries – but not always or everywhere. Experience to date suggests that there are some common traps and obstacles that lead to less favorable outcomes, and much of the rest of this book in effect suggests guidelines that countries wanting better outcomes should follow.

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