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Devolution as a means to adequate social safety nets?

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  • Van Mechelen, Natascha
  • De Maesschalck, Veerle

Abstract

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.

Suggested Citation

  • Van Mechelen, Natascha & De Maesschalck, Veerle, 2007. "Devolution as a means to adequate social safety nets?," MPRA Paper 13419, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:13419
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    File URL: https://mpra.ub.uni-muenchen.de/13419/1/MPRA_paper_13419.pdf
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    References listed on IDEAS

    as
    1. Aline Coudouel & Stefano Paternostro, 2006. "Analyzing the Distributional Impact of Reforms : A Practitioner’s Guide to Pension, Health, Labor Markets, Public Sector Downsizing, Taxation, Decentralization, and Macroeconomic Modeling, Volume 2," World Bank Publications, The World Bank, number 7041.
    2. 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.
    3. Ragin, Charles C., 2000. "Fuzzy-Set Social Science," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226702773.
    4. Pauly, Mark V., 1973. "Income redistribution as a local public good," Journal of Public Economics, Elsevier, vol. 2(1), pages 35-58, February.
    5. Sharma, Chanchal Kumar, 2004. "Decentralization Dilemma: Measuring the Degree and Evaluating the Outcomes," MPRA Paper 204, University Library of Munich, Germany, revised Nov 2005.
    6. Ragin, Charles C., 2006. "Set Relations in Social Research: Evaluating Their Consistency and Coverage," Political Analysis, Cambridge University Press, vol. 14(03), pages 291-310, June.
    7. repec:ucp:bkecon:9780226702766 is not listed on IDEAS
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    More about this item

    Keywords

    decentralization; devolution; social policy; social assistance; Europe; OECD; Fuzzy Set; social welfare; race to the bottom; federalism;

    JEL classification:

    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • A10 - General Economics and Teaching - - General Economics - - - General
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • D60 - Microeconomics - - Welfare Economics - - - General
    • A14 - General Economics and Teaching - - General Economics - - - Sociology of Economics

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