More than You Can Handle: Decentralization and Spending Ability of Peruvian Municipalities

23 Pages Posted: 21 Jan 2014

See all articles by Norman Loayza

Norman Loayza

World Bank - Research Department

Jamele Rigolini

New York University (NYU) - Department of Economics

Oscar Calvo‐González

World Bank

Multiple version iconThere are 2 versions of this paper

Date Written: March 2014

Abstract

This article builds on a comprehensive dataset for Peru that merges municipal fiscal accounts with information about municipalities’ characteristics such as population, poverty, education, and local politics to analyze the leading factors affecting the ability of municipalities to execute the allocated budget. According to the existing literature and the Peruvian context, we divide these factors into four categories: the budget size and allocation process; local capacity; local needs; and political economy constraints. While we do find that all four factors affect decentralization, the largest determinant of spending ability is the adequacy of the budget with respect to local capacity. The results confirm the need for decentralization to be implemented gradually over time in parallel with strong capacity building efforts.

Suggested Citation

Loayza, Norman and Rigolini, Jamele and Calvo-Gonzalez, Oscar, More than You Can Handle: Decentralization and Spending Ability of Peruvian Municipalities (March 2014). Economics & Politics, Vol. 26, Issue 1, pp. 56-78, 2014. Available at SSRN: https://ssrn.com/abstract=2382310 or http://dx.doi.org/10.1111/ecpo.12026

Norman Loayza (Contact Author)

World Bank - Research Department ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Jamele Rigolini

New York University (NYU) - Department of Economics ( email )

269 Mercer Street, 7th Floor
New York, NY 10011
United States

Oscar Calvo-Gonzalez

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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