Whether in a federation or in a unitarystate, lower-tier governments play an important role in delivering public policies and services. Their provision of services has an economic impact on overall activity, on the allocation of resources, and on the pursuit of equity objectives. Their financing has an impact on the levels and types of taxation, with allocative and distributional consequences. Their borrowing has an influence on monetary conditions and interest rates. The importance of secondary tiers of government is recognized in the IMF’s financial
Mr. Niko A Hobdari, Vina Nguyen, Mr. Salvatore Dell'Erba, and Mr. Edgardo Ruggiero
tensions ( Annex 4 ).
Table 4. Main Aspects of Fiscal Decentralization in the Four Case Studies 1
Type of Decentralization
Unitarystate with devolved functions to 47 county governments
Federal state with devolved functions to the capital city and 36 state governments
Unitarystate with devolved functions to municipalities
Unitarystate with deconcentrated functions to 111 districts within four regions
Counties are responsible for the provision of primary local
Mr. Ehtisham Ahmad, Mr. Giorgio Brosio, and Mr. Vito Tanzi
There is a widespread presumption that decentralization improves public service provision. This has led to policy prescriptions that are assiduously adhered to by countries and international. This paper reviews the recent evidence from OECD countries-which is seen to be inconclusive. This suggests the need for a careful design of programs that take into account the political economy constraints and incentives, as well as more systematic and thorough evaluations of outcomes.