Decentralization and the Provision and Financing of Social Services: Concepts and Issues

This paper is the fruit of an attempt to distinguish the elements, present in a fiscal decentralization process, that are likely to contribute to efficiency enhancement in the provision of social services in developing countries. From the methodological point of view, the paper makes an effort, whenever possible, to isolate the economic from the political in the arguments for and against fiscal decentralization. These two sets of arguments, economic and political, both equally important, are often intermingled in the literature. The distinction between them may improve our understanding of the advantages and limitations of the selection of a 'decentralized' provision of social services. Although nearly all the aspects of the fiscal decentralization process may be of some relevance in terms of the issue of equitable social service provision, the paper tries to stress the need to provide adequate incentives to local bureaucracies through the design of transfers and through community participation.