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There appears to be an increasing trend in worldwide fiscal decentralization. In particular, many developing countries are turning to various forms of fiscal decentralization as an escape from inefficient and ineffective governance, macroeconomic stability, and inadequate growth. Fiscal Decentralization in Developing Countries: An Overview edited by Professors Bird and Vaillancourt and featuring important research from leading scholars assesses the progress, problems and potentials of fiscal decentralization in a variety of developing countries around the world. With rich and varied case-study material from countries as diverse as India, China, Colombia, Bosnia-Herzegovina and South Africa this volume complements neatly the collection Fiscal Aspects of Evolving Federations edited by David Wildasin and also published by Cambridge, which presented theoretical advances in the area of research.
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.
In an effort to reduce poverty and improve nutrition, this Bank operation assisted the Indian program Operation Flood to develop the dairy industry in India. This study examines the policy changes instituted to support the aid flow to the dairy sector and discusses the lessons learned and benefits realized through improved dairy production. It also presents suggestions for improvement. This program differs from other Bank efforts in that it focuses on a single commodity to alleviate poverty and raise living standards.
March 1998 Applying an index for the quality of governance reveals a surprisingly strong positive correlation between fiscal decentralization and quality of governance. Debates about the appropriate role, policies, and institutions of the state are often hampered by the lack of a definition for good government. To provide a quantifiable measure of good government, Huther and Shah develop an index for the quality of governance for a sample of 80 countries. They apply the index to the debate on the appropriate level of fiscal decentralization. In measuring the quality of governance, the authors develop indices for the government's ability to: * Ensure political transparency and a voice for all citizens (the citizen participation index measures political freedom and political stability). * Provide effective public services efficiently (the government orientation index measures judicial and bureaucratic efficiency and the absence of corruption). * Promote the health and well-being of its citizens (the social development index measures human development and equitable distribution of income). * Create a favorable climate for stable economic growth (the economic management index measures outward orientation, independence of the central bank, and an inverted debt-to-GDP ratio). In relating the index of governance quality to degree of fiscal decentralization for the 80 countries, Huther and Shah are not surprised to find a positive relationship between fiscal decentralization and quality of governance. But the strength of the correlation is surprising. This paper-a product of Country Evaluation and Regional Relations Division, Operations Evaluation Department-is part of a larger effort in the department to examine the role of the authorizing environment in public sector performance.
An in-depth analysis of the fundamental role that decentralization plays in developing countries, using detailed statistical data to examine the actual fiscal structure between tiers of government, and the effects of decentralization at the local, national and international levels.
This paper explores the impact of fiscal decentralization on the efficiency of public service delivery. It uses a stochastic frontier method to estimate time-varying efficiency coefficients and analyzes the impact of fiscal decentralization on those efficiency coefficients. The findings indicate that fiscal decentralization can improve the efficiency of public service delivery but only under specific conditions. First, the decentralization process requires adequate political and institutional environments. Second, a sufficient degree of expenditure decentralization seems necessary to obtain favorable outcomes. Third, decentralization of expenditure needs to be accompanied by sufficient decentralization of revenue. Absent those conditions, fiscal decentralization can worsen the efficiency of public service delivery.
The question of what makes fiscal decentralization work is faced by many policymakers around the world. This book draws on both the relevant literature and policy and technical advice provided by the IMF to a wide range of member countries, and discusses the key factors that help make decentralization sustainable, efficient, and equitable from a macroeconomic perspective. It focuses on institutional reforms (in the revenue and expenditure assignments to different levels of government, the design of intergovernmental transfers, and public financial management systems) that are suited to different countries circumstances, and their appropriate sequencing.