Constitutions, regulations, and taxes: Contradictions of different aspects of decentralization

The paper confronts different aspects of decentralization: fiscal decentralization, postconstitutional regulatory decentralization, and constitutional decentralization - using a single dataset from Russian Federation of the Yeltsin period as a politically asymmetric country and a variety of indicators. It finds no robust correlation between different decentralization aspects; moreover, three processes of devolution appearing in the same country at the same time seem to be driven by different (though partly overlapping) forces. Hence, a specific aspect of decentralization is hardly able to serve as a proxy for another one or for the overall decentralization process. --Regulatory decentralization,fiscal decentralization,determinants of decentralization

Fiscal descentralization and the quality of government: evidence from panel data

In this paper we focus on the relationship between fiscal decentralization and government quality. In a sample of 29 developing and developed countries over the period 1984-1997, fiscal decentralization has a positive effect on institutional quality but this effect diminishes as countries become wealthier. Moreover, the positive effect of fiscal decentralization on government quality is reduced by electoral and decision-making decentralization in poor and medium income countries whereas these forms of decentralization seem to improve the impact of fiscal decentralization on government quality in rich countries.Quality of government, fiscal decentralization, political decentralization, panel data

Constitutional Impediments to Decentralization in the World\u27s Largest Federal Country

Decentralization is often advocated as a means of improving local democracy and enhancing what economists call allocative efficiency. In federal countries, where power is already divided between national and state governments, decentralization involves the devolution of power from state to local governments. The world’s largest federal country, India, took an unusual step to advance decentralization: it passed the 74th Constitutional Amendment Act to confer constitutional status on municipalities. However, India’s efforts to promote the devolution of power through a national urban renewal scheme have not succeeded for three reasons. The first is that India’s decentralization process is incomplete. Political decentralization has been stymied by the language of the constitutional amendment itself; administrative decentralization has been hampered by the comparative advantage of entrenched state-level institutions; and fiscal decentralization has not occurred because financial responsibility—but not significant revenue—has been devolved. The second reason is that decentralization has been undertaken in a top-down manner, which has exacerbated Center-state relations and mitigated the goal of allocative efficiency. Third is the relative weakness of local governance structures, which has created a Catch-22 situation: as long as the local governments lack significant capacity, the states are reluctant to devolve power to them. Additional effort needs to be directed towards an effective model of cooperative federalism. With Prime Minister Narendra Modi poised to create “smart cities” and promote urban renewal, it is critical to understand why India’s prior decentralization efforts have largely failed. The lessons learned over the past decade are an important guide to the future of cities in India as well as in other federal countrie

Decentralization and Ethnic Conflict: The Role of Empowerment

Decentralization is increasing in all parts of the world. Assessing the efficiency of decentralization as a means to mitigate ethnic conflict is then of primarily importance. This paper builds a simple model of decentralization as an empowerment mechanism. It suggests that decentralization could promote peace conditional on a set of countries and groups characteristics. Typically, decentralization should empower minorities which are small at the national level, while representing a critical mass of the population in the regions they live in. Empirical results confirm that decentralization impacts ethnic conflict only when those conditioning factors are controlled for. Furthermore, decentralization dampens all forms of ethnic violence for groups spatially concentrated enough and/or for groups having a local majority. In contrast, it fuels protest and even rebellion for groups lacking one. The paper then highlights the crucial need to build checks and balances mechanisms at the regional level for local minorities not being harmed by the decentralization process.Minorities; Ethnic Conflict; Decentralization; Panel Data Analysis

Decentralization of river basin management in Mozambique, South Africa and Zimbabwe: an institutional economics analysis

Southern African countries have been experienced several problems regarding the management of their river basins. In order to mitigate these problems, during the past 15 years, most of the SADC countries have adopted comprehensive reforms in the water sector towards decentralization of river basin management through changing water related institutions. However, the impact of those institutions on decentralization process of river basin management is still largely unknown. Understanding the impact of institutions on decentralization process of river basin management could be of important value for policy makers and water managers. This paper analyses the impact of institutional factors on river basin decentralization process and its performance. The paper uses an institutional economic framework, where institutional factors are broken down into contextual factors and initial conditions; characteristics of decentralization process; characteristics of central government/basin-level relationships and capacities; and internal configuration of basin level institutional arrangements. The impact of the institutional reforms on decentralization process and performance of river basin management is studied by accessing the level of decentralization of Limpopo (Mozambique), Inkomati (South Africa) and Mzingwane (Zimbabwe) river basins given the institutional factors in the respective countries. The study uses secondary data collected from different sources and primary data collected from a survey conducted in the three river basins in the studied countries. The analysis show mixed results. While the Inkomati river basin is more decentralized, the decentralization process of Mzingwane and Limpopo river basins is lagging behind. Institutional factors showed to be determinants in river basin decentralization process and its performance. The advancement of decentralization process and its performance in Inkomati river basin is associated with the endowment of financial capacity as well as the involvement of river basin stakeholders in decentralization process, while the failure of decentralization process in Mzingwane and Limpopo river basins is mainly associated with top-down approaches used in decentralization process in these basins as well as the lack of financial endowment. (Résumé d'auteur

Decentralization and Ethnic Conflict: The Role of Empowerment

Decentralization is increasing in all parts of the world. Assessing the efficiency of decentralization as a means to mitigate ethnic conflict is then of primarily importance. This paper builds a simple model of decentralization as an empowerment mechanism. It suggests that decentralization could promote peace conditional on a set of countries and groups characteristics. Typically, decentralization should empower minorities which are small at the national level, while representing a critical mass of the population in the regions they live in. Empirical results confirm that decentralization impacts ethnic conflict only when those conditioning factors are controlled for. Furthermore, decentralization dampens all forms of ethnic violence for groups spatially concentrated enough and/or for groups having a local majority. In contrast, it fuels protest and even rebellion for groups lacking one. The paper then highlights the crucial need to build checks and balances mechanisms at the regional level for local minorities not being harmed by the decentralization process.Minorities;Conflict;decentralization;Panel Data Analysis

Decentralization and Foreign Aid Effectiveness: Do Aid Modality and Federal Design Matter in Poverty Alleviation?

This paper empirically studies the impact of decentralization on foreign aid effectiveness. For this purpose, we examine a commonly used empirical growth model, considering aid modality as well as different measures of political and fiscal decentralization. Our panel estimations reveal that fiscal decentralization negatively impacts aid effectiveness, while measures of political decentralization have no significant effect or even a positive one. This result is robust for grants and overall ODA, while the growth impact of other aid types is not generally conditional on decentralization. We therefore conclude that donor countries should carefully consider how both anti-poverty instruments - foreign assistance and decentralization - work together.foreign aid, growth, decentralization

Priorities for the Distribution of Interbudgetary Transfers Under the Conditions of Fiscal Decentralization in Ukraine

The article is devoted to the problem of the distribution of intergovernmental transfers in Ukraine, taking into account fiscal decentralization trends. To perform the delegated functions, local governments need to have sufficient funding. However, the revenues of local budgets are insufficient to cover all necessary expenses. Therefore, inter-budget transfers, which in Ukraine are the main instrument of financial equalization, play an important role in ensuring the implementation of delegated powers by local governments. The aim of the article is determination of the priorities for the distribution of intergovernmental transfers in Ukraine in the context of fiscal decentralization. The research methodology combines quantitative and qualitative methods. Using quantitative methods, the principles of fiscal decentralization in Ukraine are observed through the mechanism of distribution of intergovernmental transfers. Using high-quality methods and based on the analysis, the priorities of the distribution of inter-budget transfers in the context of fiscal decentralization are formulated. An analysis of foreign publications on fiscal decentralization has shown that the uncertainty of priorities in this area reduces the effectiveness of fiscal decentralization and inhibits the economic development of regions. Prioritization of the distribution of intergovernmental transfers is preceded by the definition of principles for the distribution of intergovernmental transfers. Based on the results of a quantitative analysis, namely, the identified dynamics of fiscal decentralization indicators and the impact of the distribution of intergovernmental transfers on economic development, the following priorities for the distribution of intergovernmental transfers in fiscal decentralization are identified: supporting the prevalence of targeted transfers over non-targeted transfers, increasing the share of capital transfers, increasing the accountability of local authorities self-government regarding the use of funds received in the form of intergovernmental budget transfers

In Government We Trust: The Role of Fiscal Decentralization

We measure the contribution of fiscal decentralization to trust in government. Using repeated cross-country survey data of individuals on several measures of trust in govern- ment over the 1994-2007 period, we estimate an ordered response model of the government trust and fiscal decentralization nexus. We control for unobserved country characteristics, macroeconomic determinants, and individual characteristics. Our main finding is that fiscal decentralization increases trust in government. More specifically, a one percentage point increase in fiscal decentralization causes roughly a four-fifths of a percentage point increase in government trust. The beneficial effect of fiscal decentralization on trust in government is neither limited to nor necessarily large for relatively decentralized countries.Fiscal Decentralization;Government Trust;Social Capital

Fiscal decentralization and regional disparity: Evidence from cross-section and panel data

The advantages and disadvantages of public sector decentralization are widely discussed in economics and political science. Some authors argue that decentralization leads to an optimal provision of public services and promotes economic growth, while others emphasize the dangers of competition between sub-national governments, especially those associated with interregional redistribution. Using cross-section and panel data for 23 OECD countries from 1982 to 2000, this paper empirically studies the impact of fiscal decentralization on regional disparities. We find that a higher degree of decentralization is associated with lower regional disparities. Hence, poor regions experience no disadvantages from decentralization and instead appear to benefit. --Decentralization,Regional Disparity,Inequality,Fiscal Federalism,Panel Data Evidence