Fiscal Decentralization: A Political Theory with Latin American Cases

Abstract

Theories of fiscal federalism explain the efficiency and other economic gains from decentralization but do not explain its extent and nature in practice. The authors develop a political theory of decentralization that focuses on the lines of political accountability between politicians at different levels of government. The more accountable central-level politicians—presidents and legislators—are to subnational politicians, the greater the extent of decentralization and the more it will conform to the preferences of subnational politicians, for example, with respect to the degree of the center's discretion. The model is tested on five Latin American countries that, although formally decentralized, in fact exhibit wide differences in the distribution of spending and revenue responsibilities. The theory also helps explain a number of problems governments have encountered in decentralizing, including subnational debt crises and a mismatch between responsibilities and resources.

Urban Governance and Service Delivery in African Cities: The Role of Politics and Policies

“…Fiscal decentralisation interacts strongly with these challenges over administrative decentralisation. In general, sub-national officials will prefer inter-governmental transfers to support service delivery because they do not want to lose popularity with their citizens by raising taxes (Garman et al, 2001; see also Smoke, 2004). As Rodden (2002) notes, such transfers also allow local government to shift blame for poor service delivery to the central government, reducing accountability.…”

“…As Rodden (2002) notes, such transfers also allow local government to shift blame for poor service delivery to the central government, reducing accountability. Presidents, however, prefer that local government relies on taxes rather than transfers (Garman et al, 2001). Yet, divided authority may encourage sub-national authorities to prefer greater taxation powers in order to reduce their dependence on the central government.…”

Rebuilding Local Government Finances After Conflict: Lessons from a Property Tax Reform Programme in Post-Conflict Sierra Leone

“…Central governments have retained control over the most lucrative tax bases, local governments lack skilled human resources, and many local governments have continued to rely on policy frameworks inherited from the colonial period that are poorly suited to low-income contexts (Bahl, 1999;Garman, Haggard, & Willis, 2001;Kelly, 2000;Kelly & Musunu, 2000;Rosengard, 1998). However, more recent research has placed greater emphasis on the political barriers to effective sub-national tax collection.…”

Selection and Passage of County Land Preservation Voter Referendum: The Role of Government

“…Advocates of a devolution of power and authority to sub-national governments claim that they provide more effective policy outcomes because they are "closer to the people" (Kelleher and Yackee, 2004). In addition, various researchers have supported the strengthening of governance or intergovernmental relationships (Richardson, 2011;Kelleher and Yackee, 2004;Garman, Haggard and Willis, 2001;Conlan, 1998).…”

“…Walker (2000) focuses on the pressures placed on the government to both centralize and devolve policy-making authority. Others study the comparative politics perspective that frames the initial act of devolution as a strategic one driven by the short and/or long term motivations of the political party in control (Garman, Haggard and Willis, 2001;Sawyer, 1969). Kelleher and Yackee (2004) argue that a complete understanding of the policymaking process requires a focus on the policy impacts of devolution at the subnational level.…”