Fiscal decentralization and local finance in developing. Davoodi and zou 1998 found a negative relationship between fiscal decentralization and economic growth in developing countries in their study of 46 countries for the period 1970 to 1989. Fiscal decentralization and economic development sage journals. This situation is made worse by pressure from both multilateral and bilateral agencies to developing countries to liberalize trade in agricultural products. Project muse fiscal decentralization in developing. Of all published articles, the following were the most read within the past 12 months. Given that the w orld bank s work is exclusively in developing countries, it must careful. In this paper, we describe the system of local government and local government finance in south africa. Fiscal decentralization consists primarily of devolving revenue sources and expenditure functions to lower tiers of government. Decentralization in developing economies lucie gadenne monica singhal march 2014 abstract standard models of fiscal federalism suggest many benefits of decentralization in developing economies, and there has been a recent push toward decentralization around the world. Wider working paper 2016172 fiscal decentralization. Their explanation is that subnational governments spend a larger portion of their budgets on items such as.
Opportunities and risks of fiscal decentralization. Fiscal decentralization and economic growth sciencedirect. Many developing countries are seeking to improve governance with fiscal decentralization. Trade and development isbn 0 521 64143 8 hardbound 1. Financial responsibility is a core component of decentralization. In countries that have decentralized to offload fiscal imbalances from the center, it is of course not surprising to see a strong association between decentralization. Approaches to decentralisation in developing countries gsdrc. Development from below studies in fiscal federalism and statelocal finance series. Lse europe in question discussion paper series fiscal. Fiscal decentralization in developing countries download. Most developing countries now place the strengthen ing of subnational government on the development policy agenda.
Click download or read online button to get fiscal decentralization in developing countries book now. One important factor in determining the type of fiscal decentralization is the extent to which subnational entities are given autonomy to determine the allocation of their expenditures. Fiscal decentralisation in developing countries chr. Fiscal decentralization in developing countries, edited by professors bird and vaillancourt and featuring important, original, and uptodate research from leading scholars, assesses the progress, problems, and potentials of. Fiscal decentralization in developing and transition economies progress, problems, and the promise by anwar shah1 world bank washington, dc usa world bank policy research working paper 3282, april 2004 the policy research working paper series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. Poland, slovakia, czech rep, estonia, hungary, etc. Since 1980s, fiscal decentralization has been at the center stage of policy experiments among governments of developing and transition economies in latin america. The paper concludes with some observations on how to think about designing more appropriate and effective fiscal decentralization in developing countries. The above quote drawn from a recent undp document underscores the need to develop a better understanding of the concept. Fiscal decentralisation in developing countries essons for bangladesh there is an ongoing debate in bangladesh in civil society and among policymakers, whether the country should move from a highly centralised unitary state to a more devolved entity. We use a panel data set of 46 countries over the 19701989 period to investigate the relationship between fiscal decentralization and economic growth. Anecdotal evidence and case studies provide some insights, but additional policy experimentation and more systematic research are needed to understand more broadly the realities of and prospects for fiscal decentralization in developing countries. When is fiscal decentralization good for governance.
Fiscal decentralization forms the backbone of myanmars efforts to strengthen public services, encourage development across the country, and secure peace and stability. Developing countries have endorsed fiscal decentralization policies based on its theoretical appeal. Localization has been pursued through varying combinations of political, administrative and fiscal decentralization initiatives. If local governments and private organizations are to carry out decentralized functions effectively, they must have an adequate level of revenues either raised locally or transferred from the central government as well as the authority to make decisions about expenditures. This reform is stretched almost democratization worldwide, mainly in developing countries and in countries which come from deep political transformations. There appears to be an increasing trend in worldwide fiscal decentralization. They also failed to establish any meaningful correlation between fiscal decentralisation and economic growth in developed countries. Pa at ns rethinking decentralization in developing countries. Fiscal decentralization and economic growth 2 effects of fiscal decentralization are different in developed and in developing countries. Fiscal decentralization and local finance in developing countries. It is therefore worth revisiting what we know about political and economic institutions to understand how and under what circumstances decentralization can be beneficial. The challenge of local government financing in developing countries. In many instances the complaint is that fiscal decentralisation has taken place without the necessary revenue empowerment. Given that the w orld bank s work is exclusively in developing countries.
Decentralization of power is made to challenge the monopoly of central government decisionmaking. In most developing countries, decentralization must be an incremental process of building the capacity of nongovernmental and local organizations to accept and carry out effectively new functions and responsibilities. Fiscal policy for growth and development world bank. Decentralisation and the changing role of central finance agencies. The last decade has seen a renewed interest in the concept of fiscal decentralization or fiscal federalism. Rethinking fiscal decentralization policies in developing. Developed countries are reshaping their intergovernmental. It outlines the reasons why decentralisation is usually undertaken in developing countries and how the administrative, political and fiscal. Much of the literature on decentralization, normative and empirical, is based on industrial countries.
The author concludes that fiscal decentralization provides promise for those nations wishing to encourage their subnational governments to assume additional responsibilities. A case study of ghana by micheal boateng, master of arts. This is the case of davoodi and zou 1997, who conclude that fiscal decentralization is negatively correlated to economic growth in developing countries, but has no significance in developed countries. Developing nations, however, have ver y dif fer ent insti tutional frameworks. Fiscal decentralization in developing countries edited by. The virtues and reality of decentralizing governance in developing countries have been the subject of vigorous debate since that time, and the fiscal aspect of decentralization has certainly been one aspect of that debate. Fiscal decentralization in east and southern africa. Fiscal decentralization and intergovernmental fiscal. However, developing countries presently still have less. The author discusses the revolution in public sector thinking that is transforming the public sectors of developing and transition countries. Decentralization and poverty alleviation policies most governments in afri ca and some proponents of decentralization in developing countries.
Subnational expenditures in developing countries as a percentage of total public expenditures have also increased over the past two decades. Political decentralization has advanced in most countries. This paper examines the theory behind fiscal decentralization and suggests the reasons for its renewed popularity. Fiscal decentralization in developing countries edited by richard m. This transfer of powers to local level makes this important process difficult to realize. Standard models of fiscal federalism suggest many benefits of decentralization in developing economies, and there has been a recent push toward decentralization around the world. Development from below studies in fiscal federalism and statelocal finance series roy bahl, richard m. Mar 30, 2018 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. It includes practical suggestions on how to proceed in this area to achieve economic. Fiscal decentralization in asia challenges and opportunities jorge martinezvazquez fiscal decentralization in asia challenges and opportunities this publication discusses the decentralization issues faced by countries of asia and the pacific. However, developing countries presently still have less decentralization, particularly on the revenue side, than both developed countries today and the united states and europe historically. However, developing countries presently still have less decentralization, particularly on the revenue side, than both developed countries. We find that developed countries are on average more decentralized than developing countries and that asia, europe and north america are among the most.
Fiscal decentralization in developing and transition. The revenue dimension of fiscal decentralization in south africa is the subject of this paper. Pdf on jan 1, 2000, paul smoke and others published fiscal decentralization in developing countries. Decentralization in government developing countries. Fiscal decentralisation overseas development institute. Pdf fiscal decentralisation in developing countries. Poor countries initiative, and the fiscal decentralization strategy 117 3. Asiapacific community of practice on managing for development results, asian development bank, pp. Countries are reconsidering their fiscal systems and searching for the right balance between central government control and decentralized governance.
The extensive literature about the theory and practice is surveyed and longstanding problems and new questions are addressed. The extensive literature about the theory and practice is surveyed, and longstanding problems and new questions are addressed. Distribution of conditional transfers contents acknowledgements 3 1. 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. Oates the point of departure for my contribution to this symposium is the striking contrast in the extent of fiscal centralization of the industrialized and the developing countries.
This brief examines fiscal decentralisation experiences in developing countries and explores factors affecting the reform process that could inform future policy and research on fiscal. The country has made important first steps in the decentralization process, but as yet. About the asian development bank fiscal decentralization in asia. Empirical evidence to justify or discredit the pursuit of fiscal decentralization in developing countries is scant and mixed.
Decentralization and the increased autonomy in local governments. Fiscal decentralization is widely recognized as an essential component in chinas transition to a market economy, and advocated. Brazil, which moved in this direction after their constitutional reform of 1988. Very often decentralization is pointed to as one of the main causes of corruption in in literature.
This team has examined the trends of decentralization in three southeast asian countries, namely indonesia, thailand and the philippines, and has analyzed their ongoing reforms in comparison with the experience of japan. Pdf fiscal decentralization in developing countries. We consider how the tradeoffs associated with fiscal federalism apply in developing countries and discuss reasons for. A broader view of fiscal decentralization in developing countries. As a developing country, the experience of south africa promises to be relevant for other developing countries. The result is a great deal of variation in the extent to which responsibility for infrastructure service delivery is assigned to local governments alm 2010. Bird and francois vaillancourt recent years have seen worldwide interest in.
It is argued that decentralization broadens the potential for corruption. 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. Fiscal decentralization and economic growth in china. While measuring decentralization is equally complex, the fiscal flows to, from and among different levels of government can be used assess some aspects of fiscal decentralization. Fiscal decentralization in developing countries semantic scholar. During the past two decades, many developing countries have implemented decentralisation reforms.
Lessons from those two countries and comparisons with some other developed and developing nations are provided. Pdf fiscal decentralization in developing and transition. Fiscal decentralization involves shifting some responsibilities for expenditures andor revenues to lower levels of government. The virtues and reality of decentralizing governance in developing countries have been the subject of vigorous debate since that time, and the fiscal aspect of decentralization has.
Pdf on jan 1, 2018, roy bahl and others published fiscal decentralization and local finance in developing countries find, read and cite all the research you need on researchgate. This fiscal decentralisation paper forms part of a series of introductory guides on key. Administrative decentralization strategies for developing. This public financial management introductory guide defines fiscal decentralisation and discusses how it fits into to wider decentralisation policy. Reconciling principles and practice 3 the decentralization model do not fit the developing country setting as well. Such analyses, while potentially appropriate for more developed countries, ignore the critical factors and choices facing. However, developing countries presently still have less decentralization, particularly on the. Fiscal decentralisation, the devolution of taxing and spending powers to lower levels of government, has become important to governance in many countries. Fiscal decentralisation, the devolution of taxing and spending powers to lower levels of.
Fiscal decentralization in a for the asia foundation. It uses the primary sources of data regarding economic activity of general, central, and subnational governments to evaluate the economic dimension of decentralization between 2005 and 20. Global perspectives on the obstacles to fiscal devolution studies in fiscal federalism and statelocal finance martinezvazquez, jorge, vaillancourt, francois on. The world bank has had programs in support of decentralization in 74 countries during 19862001. Developing countries have endorsed fiscal decentralization policies based on its theoretical appeal world bank, 2000. None of the claims on either extreme that fiscal decentralization retards economic development and has a variety of undesirable macroeconomic effects. Decentralization is a complex and multifaceted concept that spans fiscal, political, and administrative dimensions. Fiscal decentralization determinants and local economic development in eu countries anca florentina gavriluta vatamanu, florin oprea abstract this work aims to assess the impact of fiscal decentralization on local regional development in the eu member states while controlling for macroeconomic and local autonomy specific factors. This comes after a halfcentury of fiscal centralization in most developed and developing nations. Many papers on fiscal decentralization focus on the conventional arguments for, or against fiscal decentralization.
Rethinking decentralization in developing countries. However, the same word is often used to describe different things. We find a negative relationship between fiscal decentralization and growth in developing countries, but none in developed countries. Pdf fiscal decentralization and local finance in developing. Government decentralization reforms in developing countries. This site is like a library, use search box in the widget to get ebook that you. Using data for 80 countries, huther and shah 1996 also found a positive correlation between fiscal decentralization and economic growth. Fiscal decentralization and intergovernmental fiscal relations. Decentralization is a complex phenomenon involving many geographic entities, societal actors and social sectors.
Fiscal decentralisation in developing countries essons for. If effective fiscal decentralization requires meaningful. In particular, many developing countries are turning to various forms of fiscal. Decentralization and infrastructure in developing countries. Fiscal decentralization in developing and transition economies. Rethinking fiscal decentralization policies in developing economies.
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