More than you can handle : decentralization and spending ability of Peruvian municipalities
AbstractIn 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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Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 5763.
Date of creation: 01 Aug 2011
Date of revision:
Public Sector Expenditure Policy; Subnational Economic Development; Debt Markets; Political Economy; Municipal Financial Management;
Other versions of this item:
- Norman V. Loayza & Jamele Rigolini & Oscar Calvo-Gonzlez, 2014. "More than You Can Handle Decentralization and Spending Ability of Peruvian Municipalities," Working Papers 2014-4, Peruvian Economic Association.
- H7 - Public Economics - - State and Local Government; Intergovernmental Relations
- H83 - Public Economics - - Miscellaneous Issues - - - Public Administration
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- O23 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-08-22 (All new papers)
- NEP-GEO-2011-08-22 (Economic Geography)
- NEP-LAM-2011-08-22 (Central & South America)
- NEP-PBE-2011-08-22 (Public Economics)
- NEP-POL-2011-08-22 (Positive Political Economics)
- NEP-URE-2011-08-22 (Urban & Real Estate Economics)
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