More Than You Can Handle : Decentralization and Spending Ability of Peruvian Municipalities
In the past three decades, emerging countries have gone through extensive decentralization reforms. Yet, there are no studies assessing quantitatively the relative importance of various factors known to affect the success of decentralization. This...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110817143157 http://hdl.handle.net/10986/3525 |
| Summary: | In the past three decades, emerging
countries have gone through extensive decentralization
reforms. Yet, there are no studies assessing quantitatively
the relative importance of various factors known to affect
the success of decentralization. This paper builds on a
comprehensive dataset the authors constructed for Peru,
which merges municipal fiscal accounts with information
about municipalities' characteristics such as
population, poverty, education, and local politics. The
paper then analyzes the leading factors affecting the
ability of municipalities to execute the allocated budget
using complementary methodologies, from least squares to
quantile regression analyses. According to the existing
literature and the Peruvian context, the analysis divides
these factors into four categories: the budget size and
allocation process; local capacity; local needs; and
political economy constraints. Although all four factors
affect decentralization, the largest determinant of spending
ability is the adequacy of the budget with respect to local
capacity. The results confirm the need for decentralization
to be implemented gradually over time in parallel with
strong capacity building efforts. |
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