Fiscal Decentralization and the Efficiency of Public Service Delivery

31 Pages Posted: 14 Apr 2015

See all articles by Moussé Sow

Moussé Sow

International Monetary Fund; Université d'Auvergne - Clermont 1 - Centre d'Etudes et de Recherches sur le Developpement International (CERDI)

Ivohasina Fizara Razafimahefa

Office of the President of the Republic of Madagascar

Date Written: March 2015

Abstract

This paper explores the impact of fiscal decentralization on the efficiency of public service delivery. It uses a stochastic frontier method to estimate time-varying efficiency coefficients and analyzes the impact of fiscal decentralization on those efficiency coefficients. The findings indicate that fiscal decentralization can improve the efficiency of public service delivery but only under specific conditions. First, the decentralization process requires adequate political and institutional environments. Second, a sufficient degree of expenditure decentralization seems necessary to obtain favorable outcomes. Third, decentralization of expenditure needs to be accompanied by sufficient decentralization of revenue. Absent those conditions, fiscal decentralization can worsen the efficiency of public service delivery.

Keywords: Fiscal decentralization, Public services, Expenditure efficiency, stochastic frontier analysis, public expenditure, revenue, subnational, coefficients, expenditure decentralization, public spending, public investment, local governments, subnational government, subnational governments, fiscal federalism

JEL Classification: C18, C26, H20, H77

Suggested Citation

Sow, Moussé and Razafimahefa, Ivohasina Fizara, Fiscal Decentralization and the Efficiency of Public Service Delivery (March 2015). IMF Working Paper No. 15/59. Available at SSRN: https://ssrn.com/abstract=2594142

Moussé Sow (Contact Author)

International Monetary Fund ( email )

1900 Pennsylvania Avenue, NW
Washington, DC 20431
United States

Université d'Auvergne - Clermont 1 - Centre d'Etudes et de Recherches sur le Developpement International (CERDI) ( email )

65 Boulevard Francois Mitterrand
63000 Clermont-Ferrand Cedex 1
France

Ivohasina Fizara Razafimahefa

Office of the President of the Republic of Madagascar ( email )

Madagascar

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
136
Abstract Views
820
rank
227,106
PlumX Metrics