Decentralization, spending efficiency and pro-poor outcomes in Morocco

This paper studies how decentralization affects poverty, vulnerability, and inequality in Morocco, in the context of ongoing regionalization reforms. We use different non-parametric approaches to assess spending efficiency of Moroccan municipalities and regions over the period 2005-2009. The results indicate that the efficiency of spending in improving pro-poor outcomes is dependent on the fiscal autonomy of subnational governments. While the impact of transfer dependency is not statistically significant, more granular data show that formula-based (unconditional) transfers significantly improve spending efficiency when the opposite is true for ad-hoc (conditional) transfers. Furthermore, we investigate the impact of political decentralization and find that local spending is less efficient in regions where municipal governments have a greater responsibility for spending compared to the regional government. This finding also holds in more fragmented regions with a high number of municipalities. Finally, we test whether there is an electoral budget cycle in Morocco and find that spending efficiency decreases the year of local elections, but increases with the level of education of elected officials.