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Decentralization and Bailouts in Colombia

Author

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  • Echavarría, Juan José
  • Rentería, Carolina
  • Steiner, Roberto

Abstract

This paper examines the decentralization process in Colombia, particularly as it relates to reforms embodied in the 1991 Constitution, and the bailouts of territorial entities that have occurred in subsequent years as a result of perverse incentive structures. The paper provides a summary of the basic features of the decentralization process in Colombia, including an analysis of revenue and expenditure assignments, the intergovernmental transfer system and recent developments in terms of territorial indebtedness. Specific case studies involve the determinants of three types of bailouts by the central government to territorial entities: the provision of soft loans to be used by departments to restructure their finances, the bailout of territorial entitities' education expenditures, and the Medellin Metro. The paper concludes with lessons learned and policy recommendations.

Suggested Citation

  • Echavarría, Juan José & Rentería, Carolina & Steiner, Roberto, 2002. "Decentralization and Bailouts in Colombia," IDB Publications (Working Papers) 1085, Inter-American Development Bank.
    • Handle: RePEc:idb:brikps:1085
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    References listed on IDEAS

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    1. János Kornai, 2014. "The soft budget constraint," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 64(supplemen), pages 25-79, November.
    2. Juan Gonzalo ZAPATA & Olga Luc�a ACOSTA & Adriana GONZ�LEZ, 2001. "Evaluación de la descentralización municipal en Colombia. ¿Se consolidó la sostenibilidad fiscal de los municipios colombianos durante los a," Archivos de Economía 2631, Departamento Nacional de Planeación.
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    5. Jesús Duarte, 1997. "Problemas del esquema actual de asignación de recursos en educación y salud," Coyuntura Social 13123, Fedesarrollo.
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    7. Roberto Steiner & Carolina Soto, 1999. "Cinco ensayos sobre tributación en Colombia," Cuadernos de Fedesarrollo 12735, Fedesarrollo.
    8. Wildasin, David E., 1997. "Externalities and bailouts : hard and soft budget constraints in intergovernmental fiscal relations," Policy Research Working Paper Series 1843, The World Bank.
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    Cited by:

    1. Braun, Miguel & Di Gresia, Luciano, 2003. "Towards Effective Social Insurance in Latin America: The Importance of Countercyclical Fiscal Policy," IDB Publications (Working Papers) 1463, Inter-American Development Bank.
    2. Joaquín Viloria-De-la-Hoz., 2015. "Santa Marta Real y Republicana : El accionar económico y político de la Provincia de Santa Marta en los albores de la independencia, 1810-1830," Cuadernos de Historia Económica 36, Banco de la Republica de Colombia.
    3. Luis Fernando Ramírez Hernández & Manuel Beltr�n Garz�n, 2009. "Justificación económica de la descentralización: un análisis desde las finanzas regionales," Revista Equidad y Desarrollo, Universidad de la Salle.
    4. Bonet-Morón, Jaime Alfredo, 2007. "Desequilibrios regionales en la política de descentralización en Colombia," Chapters, in: Fernández, Manuel & Guerra-Curvelo, Weildler & Meisel-Roca, Adolfo (ed.), Políticas para reducir las desigualdades regionales en Colombia, chapter 3, pages 44-81, Banco de la Republica de Colombia.
    5. Fernández, Manuel & Guerra-Curvelo, Weildler & Meisel-Roca, Adolfo (ed.), 2007. "Políticas para reducir las desigualdades regionales en Colombia," Books, Banco de la Republica de Colombia, number 2007-10, November.
    6. Miguel Braun & Luciano di Gresia, 2003. "Hacia un sistema de seguro social eficaz en América Latina: la importancia de una política fiscal anticíclica," Research Department Publications 4334, Inter-American Development Bank, Research Department.
    7. Foremny, Dirk, 2014. "Sub-national deficits in European countries: The impact of fiscal rules and tax autonomy," European Journal of Political Economy, Elsevier, vol. 34(C), pages 86-110.
    8. Barón-Rivera, Juan David & Meisel-Roca, Adolfo, 2004. "La descentralización y las disparidades económicas regionales en Colombia en la década de 1990," Chapters, in: Meisel-Roca, Adolfo (ed.), Macroeconomía y regiones en Colombia, chapter 4, pages 152-217, Banco de la Republica de Colombia.
    9. Michael Smart & Juan Gonzalo Zapata & Juan Camilo Chaparro, 2004. "Transferencias intergubernamentales y finanzas municipales en Colombia," Coyuntura Económica, Fedesarrollo.
    10. Webb, Steven B., 2004. "Fiscal responsibility laws for subnational discipline : the Latin American experience," Policy Research Working Paper Series 3309, The World Bank.
    11. Mariano Tommasi & Miguel Braun, 2002. "Fiscal Rules for Subnational Governments. Some Organizing Principles and Latin American Experiences," Working Papers 44, Universidad de San Andres, Departamento de Economia, revised Mar 2002.
    12. World Bank, 2005. "Colombia : Country Economic Memorandum, The Foundations for Competitiveness," World Bank Publications - Reports 8807, The World Bank Group.
    13. Sebastian Katz, 2008. "Comentarios sobre las posibilidades de un nuevo programa macroeconómico entre Honduras y el Fondo Monetario Internacional," Research Department Publications 2014, Inter-American Development Bank, Research Department.
    14. Bonet-Morón, Jaime Alfredo & Galvis-Aponte, Luis Armando (ed.), 2016. "Sistemas de transferencias subnacionales : lecciones para una reforma en Colombia," Books, Banco de la Republica de Colombia, number 2016-02, November.
    15. Galindo-Silva, Hector, 2015. "New parties and policy outcomes: Evidence from Colombian local governments," Journal of Public Economics, Elsevier, vol. 126(C), pages 86-103.
    16. Meisel-Roca, Adolfo (ed.), 2004. "Macroeconomía y regiones en Colombia," Books, Banco de la Republica de Colombia, number 2004-04, November.
    17. Mariano Tommasi, 2002. "Federalism in Argentina and the Reforms of the 1990s," Working Papers 48, Universidad de San Andres, Departamento de Economia, revised May 2002.
    18. Jaime Bonet Morón, 2004. "Descentralización fiscal y disparidades en el ingreso regional: La experiencia colombiana," Documentos de trabajo sobre Economía Regional y Urbana 49, Banco de la Republica de Colombia.
    19. Joaquín Mauricio Zuleta Arango & Lisandro López Marín & Daniel Sánchez García, 2010. "Descentralización Y Disparidades Económicas Territoriales En Colombia (1990-2005)," Observatorio de la Economía Latinoamericana, Servicios Académicos Intercontinentales SL. Hasta 31/12/2022, issue 130, April.

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    Keywords

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    JEL classification:

    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • 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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