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Decentralization in Colombia

Author

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  • Alberto Alesina

    ()

  • Alberto Carrasquilla

    ()

  • Juan José Echavarría Soto

    ()

Abstract

In the 1990’s descentralization in Colombia, a process which had begun a decade earlier, was sharply accelerated. The percentage of current Central Government revenues that are automatically transferred to the regional governments quickly jumped from about 20% to over 40%. Many analysts attribute the sharp fiscal deterioration experienced in the country to this decision. Regional governments, indeed, accumulated substantial amounts of debt and currently face serious financial difficulties. This paper is policy oriented. After a discussion of the central issues associated with descentralization in general, we turn to the specific case of Colombia. Our analysis highlights three aspects: (a) the rules that govern how a particular region’s transfers are defined. (b) the rules that govern how these resources must be spent and (c) the rules governing a regional government’s ability to issue debt. Rules governing how a region receives transfers from the central government have several problems. Firstly, they are not linked to any explicit and simple consideration of its contribution to total central government revenues, they lack simple redistributive criteria (from richer to poorer regions) and they do not sufficiently reward regional fiscal performance. Our proposals seek to correct these three deficiencies. Second, the rules that govern expenditures by the regional governments are too tight. We propose sharply reducing the constraints that face majors and governors. Third, the ability to run deficits and issue debt, in a context that includes moral hazard, has already become a source of problems. We propose a balanced budget rule for regional governments. We also argue in favor of reelection of the regional authorities (mayors and governors) as an incentive mechanism that enhances the effects of these reforms.

Suggested Citation

  • Alberto Alesina & Alberto Carrasquilla & Juan José Echavarría Soto, 2000. "Decentralization in Colombia," WORKING PAPERS SERIES. DOCUMENTOS DE TRABAJO 002254, FEDESARROLLO.
  • Handle: RePEc:col:000123:002254
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    File URL: http://hdl.handle.net/11445/824
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    References listed on IDEAS

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    1. Juan José Echavarría, 2001. "Colombia en la década de los noventa: neoliberalismo y reformas estructurales en el trópico," REVISTA CUADERNOS DE ECONOMÍA, UN - RCE - CID, July.
    2. Núñez C., Liliana & Ramírez, Juan Mauricio, 2000. "Reformas, crecimiento, progreso técnico y empleo en Colombia," Series Históricas 59, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    3. Juan Mauricio Ramírez & Liliana Núñez, 2000. "Reformas, crecimiento, progreso técnico y empleo en Colombia. Primera Parte," DOCUMENTOS DE INVESTIGACION 003436, CEPAL NACIONES UNIDAS.
    4. Judson, Ruth, 1998. "Economic Growth and Investment in Education: How Allocation Matters," Journal of Economic Growth, Springer, vol. 3(4), pages 337-359, December.
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    Citations

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    Cited by:

    1. Becerra, Ligia Melo, 2004. "Intergovernmental fiscal relations : the Colombian case," Economics PhD Theses 0304, Department of Economics, University of Sussex.
    2. Jorge Iván González, 2006. "Los aportes de Eduardo Wiesner al pensamiento económico colombiano," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 8(14), pages 17-53, January-J.
    3. Faguet, Jean-Paul & Sánchez, Fabio, 2008. "Decentralization's Effects on Educational Outcomes in Bolivia and Colombia," World Development, Elsevier, vol. 36(7), pages 1294-1316, July.
    4. World Bank, 2002. "Colombia : Poverty Report, Volume 1. Main Report," World Bank Other Operational Studies 15294, The World Bank.
    5. Luis Armando Galvis Aponte & Adolfo Meisel R., 2010. "Persistencia de las desigualdades regionales en Colombia: Un análisis espacial," DOCUMENTOS DE TRABAJO SOBRE ECONOMÍA REGIONAL Y URBANA 006631, BANCO DE LA REPÚBLICA - ECONOMÍA REGIONAL.
    6. Jaime Bonet, 2004. "Descentralización fiscal y disparidades en el ingreso regional: la experiencia colombiana," DOCUMENTOS DE TRABAJO SOBRE ECONOMÍA REGIONAL Y URBANA 002282, BANCO DE LA REPÚBLICA - ECONOMÍA REGIONAL.
    7. Ramiro Guerrero & Sergio I. Prada & Dov Chernichovsky, 2014. "La doble descentralización en el sector salud: evaluación y alternativas de política pública," CUADERNOS DE FEDESARROLLO 012019, FEDESARROLLO.
    8. Ana María Iregui & Jorge Ramos & Luz Amparo Saavedra, 2001. "Análisis De La Descentralización Fiscal En Colombia," BORRADORES DE ECONOMIA 001984, BANCO DE LA REPÚBLICA.
    9. Michael Smart & Juan Gonzalo Zapata & Juan Camilo Chaparro, 2004. "Transferencias intergubernamentales y finanzas municipales en Colombia," COYUNTURA ECONÓMICA, FEDESARROLLO, March.
    10. Gerardo Villa, 2005. "Reseña sobre el ajuste fiscal territorial después de la Constitución de 1991," ENSAYOS SOBRE ECONOMÍA REGIONAL (ESER) 003458, BANCO DE LA REPÚBLICA - ECONOMÍA REGIONAL.

    More about this item

    Keywords

    Descentralización; Economía Institucional; Reformas Institucionales; Colombia;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • P11 - Economic Systems - - Capitalist Systems - - - Planning, Coordination, and Reform
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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