Decentralization and government performance

Decentralization is not one-size-fits-all

A classic study described the conditions under which decentralization is likely to benefit governance. The desirability of decentralization depends on municipal-level factors (decentralization is better for large, high-capacity municipalities), sector-level factors (decentralization is better for sectors that do not require a high degree of technical expertise), and the functions being decentralized (it is better to decentralize setting costs and fees than to decentralize monitoring and auditing). The paper also noted that subnational governments will likely require transfers from the central government because it is easier to decentralize expenditures than to decentralize tax collection. This research provides guidelines for what type of decentralization makes sense based on conditions in a country.

Note: Other research suggests that transfers from the central government are less efficient than locally collected tax revenue.  See Facty Friday #114 for more details.

The benefits of decentralization depend on local accountability mechanisms

An annual review article summarized research about political decentralization. Among several findings, it showed that decentralization is most likely to improve government performance and reduce corruption when it is accompanied by accountability mechanisms for local politicians and bureaucrats. Those accountability mechanisms can be bottom-up (such as contested elections and public provision of information) or top-down (oversight by free media or central government audits). This research suggests that the benefits of decentralization depend on the strength of safeguards that prevent elite capture of local government resources.

Do you have a study we should share for a future Facty Friday? Send an email to drg.el@usaid.gov!