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Decentralization in Theory and Practice: A Comprehensive Review

Author

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  • Kshitiz Shrestha

    (International Center for Public Policy, Georgia State University)

  • Charles Hankla

    (International Center for Public Policy, Georgia State University Author-Workplace-Email: chankla@gsu.edu)

Abstract

Fiscal decentralization (FD) has become a cornerstone of governance reform globally, transferring authority from central to subnational governments. This comprehensive review synthesizes theoretical frameworks and empirical evidence on FD, examining its core pillars (expenditure assignment, revenue autonomy, transfers, borrowing) and diverse impacts. While FD holds potential for improving service delivery, accountability, and economic efficiency, outcomes vary significantly. The paper analyzes FD's complex effects on economic growth, poverty, inequality, regional disparities, environmental governance, macroeconomic stability, crisis response (including COVID-19), corruption, party systems, and secession risks. It underscores that FD's success is highly context-dependent, requiring robust institutions, political coherence, and careful design tailored to a country's history, capacity, and objectives. No single model fits all contexts.

Suggested Citation

  • Kshitiz Shrestha & Charles Hankla, 2025. "Decentralization in Theory and Practice: A Comprehensive Review," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper2511, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    • Handle: RePEc:ays:ispwps:paper2511
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    File URL: https://icepp.gsu.edu/files/2025/07/paper2511v3.pdf
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