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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 9: Giving decentralization a chance

Development from Below

Roy Bahl and Richard M. Bird

Extract

This concluding chapter argues that fiscal decentralization has had little chance to prove itself as a development strategy. Though only a few countries have reversed moves towards fiscal decentralization, almost none have done much to increase the fiscal autonomy of local governments. Decentralization may certainly give rise to problems, but for the most part those that have been observed in practice are due more to poor design and implementation than to any inherent flaw in the approach. The most important constraints impeding meaningful decentralization in many countries are the inadequacy of independent local government taxing powers and the failure to provide enough special arrangements for the financing and governance of large urban areas. The chapter concludes by suggesting some guidelines that may help countries to decentralize in a more effective and sustainable way.

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