Devolution of Social Protection Arrangements

Abstract

Decentralization reforms in CEE countries have been an essential component of the overall transformation process that took place after the collapse of the former communist regimes. It entered public thought as a panacea to the political, economical and social problems that emerged because of and during the transformation. It also featured prominently in social policy reforms, particularly in the case of social assistance. Local government involvement in the financing and administration of social assistance schemes has been widely promoted by various international organizations as holding the key to reducing the financial cost of such schemes through improved targeting. However, the theory of fiscal federalism provides us with sound theoretical arguments against decentralization of social assistance. According to this theoretical framework, fundamental constraints on redistribution by lower level governments would negatively affect the generosity of poverty relief systems and facilitate a ‘race to the bottom’.