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Fiscal decentralization after 20 years: What have we learned? Where do we go from here?


  • Benjamin E. Diokno

    (School of Economics, University of the Philippines?Philippine Center for Economics Development Institute of Public Economics and Regulation)


Local government units (LGUs) in the Philippines have been given significant resources through grants (called internal revenue allotment or IRA) and taxing powers. But after 20 years, LGUs have become even more dependent on the IRA. A body of evidence suggests no sharp improvement in local public service delivery. The share of local budgets devoted to devolved functions has declined, due to creeping re-centralization of health and social welfare functions, increasing substitution of centrally controlled funds for local funds, and misplaced priorities on the part of local authorities. The missing link in ensuring better delivery of devolved services is the weak process of accountability. The electoral process failed to hold local authorities accountable for their fiscal behavior. The generation of timely, relevant, and consistent information and indices of performance is the next challenge for better local public service delivery. Such information may be used by voters in holding local authorities accountable. With the threat of a fiscal crisis due to the global slowdown, and with poverty rising, the march toward fiscal decentralization might be constrained. Between reducing poverty or deepening fiscal decentralization, policy makers are likely to choose the former.

Suggested Citation

  • Benjamin E. Diokno, 2012. "Fiscal decentralization after 20 years: What have we learned? Where do we go from here?," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 49(1), pages 9-26, June.
  • Handle: RePEc:phs:prejrn:v:49:y:2012:i:1:p:9-26

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    Cited by:

    1. Ortiz, Danica Aisa P. & Abrigo, Michael R.M. & Tam, Zhandra C., 2017. "Decentralization and Health in the Philippines: A Systematic Review of Empirical Evidences," Discussion Papers DP 2017-58, Philippine Institute for Development Studies.
    2. Joseph J. Capuno, 2017. "Violent conflicts in ARMM: Probing the factors related to local political, identity, and shadow-economy hostilities," UP School of Economics Discussion Papers 201707, University of the Philippines School of Economics.
    3. Joseph J. Capuno, 2013. "Fiscal transfers and gerrymandering under decentralization in the Philippines," UP School of Economics Discussion Papers 201304, University of the Philippines School of Economics.

    More about this item


    local government units; decentralization; public service; intergovernmental grant;

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism


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