Devolution as a means to adequate social safety nets?
Decentralisation is invariably among the recommendations that international organisations such as the World Bank make for an enhancement of social provisions, and particularly a better targeting of social assistance regimes, in Eastern and Central Europe. However, theoretical literature as wel as empirical research suggests that decentralisation is not by defintion a panacea, especially when it concerns the transfers of competencies in the matter of social protection systems. It is true that there are arguments to promote redistributive activity at lower levels of government but whith regard to policies aimed at redistribution and reducing poverty (and welfare generosity) the assumption that redistribution is best organised at the central level is rather dominant. Fundamental constraints on redistribution by lower level governments would -according to this line of reasoning- facilitate a 'race to the bottom'. This paper investigates the relationship between the generosity of social assistance benefits and several dimensions of decentralisation (the administration, decision-making and funding of social assistance schemes) at two levels of government (the substate and the local level) in 21 OECD countries by means of a fuzzy set analysis. The results indicate that social asssitance benefits are more adequate in countries where the decision-making, funding and administration of social assistance schemes is controlled by the central government and in countries where central or substate governments set the basic social assistance rates and housing benefits while sharing funding liabilities with the local government level. When Central and Eastern European countries opt for decentralisation as an instrument of poverty alleviation – through a better targeting of benefits -, prudence is called for the fact that there might be a trade-off between the transfer of competencies to lowel levels of government and the generosity of welfare programmes.
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- Pauly, Mark V., 1973. "Income redistribution as a local public good," Journal of Public Economics, Elsevier, vol. 2(1), pages 35-58, February.
- Frank Castles, 1999. "Decentralization and the Post-War Political Economy," CEPR Discussion Papers 399, Centre for Economic Policy Research, Research School of Economics, Australian National University.
- Sharma, Chanchal Kumar, 2004. "Decentralization Dilemma: Measuring the Degree and Evaluating the Outcomes," MPRA Paper 204, University Library of Munich, Germany, revised Nov 2005.
- Ragin, Charles C., 2000. "Fuzzy-Set Social Science," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226702766, October.
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