In this paper, we estimate the efficiency of Metropolitan, Municipal and District Assemblies (MMDAs) in Ghana, and investigate the impact of fiscal decentralization on the efficiency of local public goods and services delivery by MMDAs.Using data from composite budgets of all 216 MMDAs, we employ both nonparametric and parametric frontier methods to carry out the study. The results with regard to our two indicators of fiscal decentralization indicate that fiscal autonomy proxied by MMDAs' internally generated funds as a share of their total revenue has a positive influence on the efficiency of MMDAs whilst vertical imbalance-a high share of central government grants in MMDAs' total expenditure-does not improve the delivery of local goods and services by MMDAs in Ghana. The findings indicate a clear signal to policy managers to prioritize support to MMDAs in the mobilization of internally generated revenue.
K E Y W O R D Sefficiency, fiscal decentralization, frontier methods, Ghana, local government 1 | INTRODUCTION Decentralization has been on the rise in developing countries in recent years (Panizza, 1999;Treisman, 2006). Many developing countries around the world are devolving responsibilities to lower tiers of government because decentralization is seen as vital for the achievement of sustained economic growth and development (Bruno & Pleskovic, 1996;Crook & Manor, 1998). In many developing countries, especially in Latin America and Africa, the implementation of decentralization systems in the past decades has largely been motivated by political concerns. For instance, in Africa, the spread of multiparty-political systems in the early 1990s created a demand for more local voice in decision-making. In addition, there has been an increased demand for improved, efficient and high-quality service delivery, as well as better accountability, from local bureaucrats.In this paper, we focus on fiscal decentralization. Fiscal decentralization involves the sharing of taxing and spending responsibilities between the central government and local government (Porcelli, 2009). In other words, fiscal decentralization accords substantial revenue and expenditure autonomy to local governments, including the power to levy taxes and user charges. 1 This may boost the fiscal space of local governments and enhance the delivery of services as well as the welfare of the population (Bado, 2012;Odusola, 2017). Given the important role of fiscal decentralization in improving the performance of local governments as well as the development outcomes of their constituencies, many studies have focusedThis is an open access article under the terms of the Creative Commons Attribution-NonCommercial-ShareAlike License, which permits use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and the content is offered under identical terms.