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Implementing decentralized local governance: a treacherous road with potholes, detours, and road closures

  • Shah, Anwar
  • Thompson, Theresa

During the past two decades, a silent revolution in public sector governance has swept across the globe aiming to move decision making for local public services closer to the people. The countries embracing and adapting to this silent revolution have had diverse motives and followed even more diverse approaches. This paper attempts to present a stylized view of the motivations and approaches used to strengthen local governance. The quest forthe right balance, i.e. appropriate division of powers among different levels of government, is not always the primary reason for decentralizing. There is evidence that the decentralization decision may have more to do with short-term political considerations than the long-run benefits of decentralization. To take stock of progress worldwide, we take a comparative look at developments in political, fiscal and administrative decentralization for a selected group of countries. Most of the decentralization literature deals with normative issues regarding the assignment of responsibilities among different levels of government and the design of fiscal transfers. The process of decentralization has not received the attention it deserves as the best laid plans can fail due to implementation difficulties. We revisit major controversies regarding preferred approaches to obtaining a successful outcome. Key approaches examined are big push versus small steps; bottom up vs. top down; and uniform vs. asymmetric decentralization. Finally, Indonesia's 1999 big bang decentralization program is evaluated. The program should be commended for its achievements over a short period of time, however incentives are lacking for local governments to be accountable and responsive to their residents.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3353.

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Date of creation: 01 Jun 2004
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Handle: RePEc:wbk:wbrwps:3353
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  1. Chaudry-Shah, Anwar, 1988. " Capitalization and the Theory of Local Public Finance: An Interpretive Essay," Journal of Economic Surveys, Wiley Blackwell, vol. 2(3), pages 209-43.
  2. Tugrul Gurgur & Anwar Shah, 2008. "Localization and corruption: panacea or pandora's box?," CEMA Working Papers 581, China Economics and Management Academy, Central University of Finance and Economics.
  3. Roy Bahl, 1999. "Implementation Rules For Fiscal Decentralization," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper9901, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  4. Boadway,Robin & Shah,Anwar, 2009. "Fiscal Federalism," Cambridge Books, Cambridge University Press, number 9780521732116.
  5. World Bank, 2003. "Decentralizing Indonesia : A Regional Public Expenditure Review Overview Report," World Bank Other Operational Studies 14632, The World Bank.
  6. Ehdaie, Jaber, 1994. "Fiscal decentralization and the size of the government : an extension with evidence from cross-country data," Policy Research Working Paper Series 1387, The World Bank.
  7. Shah, Anwar, 2004. "Fiscal decentralization in developing and transition economies: progress, problems, and the promise," Policy Research Working Paper Series 3282, The World Bank.
  8. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
  9. Brodjonegoro, Bambang & Asanuma, Shinji, 2000. "Regional Autonomy and Fiscal Decentralization in Democratic Indonesia," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 41(2), pages 111-122, December.
  10. Anwar Shah, 1999. "Governing for Results in a Globalised and Localised World," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 38(4), pages 385-431.
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