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Decentralization and fiscal management in Colombia

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  • Dillinger, William
  • Webb, Steven B.
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    Abstract

    Colombia's political geography contrasts sharply with its economy. Physical characteristics and guerilla war fragment the country geographically, yet it has a long tradition of political centrism and macroeconomic stability. Recently, with political and economic decentralization, there has been some weakening of macroeconomic performance. The authors explore institutional arrangements that have helped Colombia manage the fiscal aspects of decentralization, despite the country's political problems. Fiscal decentralization proceeded rapidly in Colombia. Education, health, and much infrastructure provision have been decentralized to the departmentos and municipios. Decentralization has led to substantial but not overwhelming problems, both in maintaining fiscal balance nationally ( as resources are transferred of subnational levels) and in preventing unsustainable deficits by the subnational governments. The problems have arisen because central government interference prevents departments from controlling their costs and because of expectations of debt bailouts. Both are legacies of the earlier pattern of management from the center, and some recent changes - especially about subnational debt - may improve matters. Colombia's traditional political process has had difficulty dealing with problems of decentralization because traditional parties are weak in internal organization and have lost de facto rule over substantial territories. The fiscal problems of subnational government have been contained, however, because subnational governments are relatively weak politically and the central government, for the time being, has been able to enforce restrictions on subnational borrowing.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2122.

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    Date of creation: 31 May 1999
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    Handle: RePEc:wbk:wbrwps:2122

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    Related research

    Keywords: Urban Economics; Banks&Banking Reform; Public Sector Economics&Finance; Municipal Financial Management; Public&Municipal Finance; Banks&Banking Reform; National Governance; Public Sector Economics&Finance; Municipal Financial Management; Urban Economics;

    References

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    1. Fiszbein, Ariel, 1997. "The Emergence of local capacity: Lessons from Colombia," World Development, Elsevier, vol. 25(7), pages 1029-1043, July.
    2. Cukierman, Alex & Webb, Steven B, 1995. "Political Influence on the Central Bank: International Evidence," World Bank Economic Review, World Bank Group, vol. 9(3), pages 397-423, September.
    3. Weingast, Barry R, 1995. "The Economic Role of Political Institutions: Market-Preserving Federalism and Economic Development," Journal of Law, Economics and Organization, Oxford University Press, vol. 11(1), pages 1-31, April.
    4. repec:fth:oxesaf:98-18 is not listed on IDEAS
    5. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
    6. Wildasin, David E., 1998. "Fiscal aspect of evolving federations : issues for policy and research," Policy Research Working Paper Series 1884, The World Bank.
    7. Philip Keefer & David Stasavage, 1998. "When does delegation improve credibility? Central Bank independence and the separation of powers," CSAE Working Paper Series 1998-18, Centre for the Study of African Economies, University of Oxford.
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    Cited by:
    1. Fabio Sánchez Torres & Michael Smart & Juan Gonzalo Zapata Giraldo, 2002. "Intergovernmental transfers and municipal finance in Colombia," WORKING PAPERS SERIES. DOCUMENTOS DE TRABAJO 002915, FEDESARROLLO.
    2. Eifert, Benn & Gelb, Alan & Borje Tallroth, Nils, 2002. "The political economy of fiscal policy and economic management in oil exporting countries," Policy Research Working Paper Series 2899, The World Bank.
    3. Ana María Iregui & Jorge Ramos & Luz Amparo Saavedra, . "Análisis de la Descentralización Fiscal en Colombia," Borradores de Economia 175, Banco de la Republica de Colombia.
    4. Gerardo Villa, 2005. "Reseña sobre el ajuste fiscal territorial después de la Constitución de 1991," INVESTIGACIONES SOBRE ECONOMÍA REGIONAL - CREE 003458, BANCO DE LA REPÚBLICA - ECONOMÍA REGIONAL.
    5. Faguet, Jean-Paul, 2014. "Decentralization and Governance," World Development, Elsevier, vol. 53(C), pages 2-13.
    6. World Bank, 2002. "Cali, Colombia : Toward a City Development Strategy," World Bank Publications, The World Bank, number 14086, October.
    7. repec:idb:brikps:4478 is not listed on IDEAS

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