Laura Monteiro de Castro Moreira, Felipe Ferré, Eli Iôla Gurgel Andrade
The Decrees 4279/10 and 7508/11 established norms to guide health politics, with impacts on funding of the Middle and High Complexity Hospital and Outpatient. To verify the effects on the consolidation of care networks in Minas Gerais, we performed an analytical-descriptive study of the National Health Fund from 2006 to 2014. We observed decentralization of responsibilities, accompanied of resources and innovative financing mechanisms, resulting expansion of the network care model. The federal government definitions suggest reduction of the autonomy and limitation of regional solutions.
This paper explores the “Bill of Rights†in the Justice Verma Committee Report as an analytical framework for gender budgeting in justice. Gender budgeting in justice, as a public good, needs effective planning and financing strategies more than just a Budget Head on “Nirbhaya Fund†in national budgets. As gender budgeting in justice is more effective at the decentralized levels, a gender-conscious fiscal devolution, rather than “one size fits all†gender budgeting policies, should be designed as the plausible entry point to integrate gender justice in fiscal federalism. If “climate change†is already integrated in the TOR of Finance Commission in India, can “TOR on gender†in the Commission be far behind?
The interconnectedness of financial deepening and income inequality has been a highly controversial discussion which has not been concluded despite many empirical and theoretical studies up to date. One of the basic building blocks for many research designs is the reliance upon the Kuznets inverted U-shaped curve which postulates that in the first phase of economic growth income inequality increases, peaks and then decreases to a tolerable level in the later phase after a certain income level had been attained. The role of financial deepening in financing economic growth is an indispensable and necessary condition enabling us to easily draw an analogy between financial deepening and income inequality in a financial version of the Kuznets curve. In spite of 30 years of economic and financial reforms in China, which represents a fairly young history of economic growth and development, there are many indicators that Chinese experience significantly deviates from the presupposed inverted U-shaped curve trajectory and its final equalizing effect. This paper relies on financial deepening data measured by monetary aggregate M2/GDP and domestic banking credit/GDP ratios in its claim that they significantly correlate with rising income inequality. The author’s intention consists not in claiming that financial deepening per se causes income inequality, but provides a political economy analysis of the specific institutional and power configuration which leads to their positive relationship. This configuration is determined by the prevailing banking model, the hukou system, financial repression and the decentralized authoritarian system. On the other hand, the absence of inequality-narrowing institutitons further aggravate the problem. All the aforementioned factors are geared at avoiding mechanical and spurious claims that financial deepening increases or decreases income inequality across countries. A historical institutionalism approach to explain China’s path related to the Kuznets curve prediction shows the central validity of open and inclusive institutions in generating inequality-narrowing benefits of financial deepening.
Assesses the extent to which the shift toward local participatory poverty reduction projects and decentralization efforts have enhanced the pace of development, increased equity in access to public programs, and improved the sustainability of development efforts. The evidence appears to indicate that local capture can overwhelm the benefits of local information, and demand-driven, competitive application processes can exclude the weakest communities and exacerbate horizontal inequities. Co-financing requirements can worsen the exclusion of the poorest households and communities and attenuate the impacts of poverty reduction programs. Greater community involvement tends to improve resource sustainability and the quality of infrastructure, and the most successful programs are implemented by local governments that have some discretion but are downwardly accountable. Few studies of participatory poverty reduction programs show clear poverty impacts, though some evidence indicates that projects with large livelihood components perform better than other participatory projects, and need more evaluations.
The 74 th Constitutional Amendment Act (CAA) enacted in 1993 gave urban local governments constitutional status and aimed to strengthen municipal governance. Municipalities were to be given greater responsibilities in the provision of basic infrastructure and social services and financial power was also to be devolved. Now, seventeen years since the passage of this constitutional amendment, the promise held out by decentralization has remained largely unrealized. In this context, the intention of this paper is to recommend specific policy initiatives for municipal governance reform in India. In drawing up these recommendations, the paper analyses two broad sources, namely the policy environments for local government in post-Apartheid South Africa and post-democracy Brazil. South Africa and Brazil are instructive case studies because they too, like India, are trying to address the issues of widespread poverty and inequality in a democratic framework. Additionally, they are widely recognized as having innovated in many aspects of the policy framework for local government and service delivery. Based on our analysis, we recommend pragmatic changes in aspects of property tax, municipal finance, community involvement and models of service delivery as the levers to improve urban governance and service delivery.
This paper sheds light on the heavy financial burden on peasants in China’s fiscal decentralization system. Using a political economy framework, this paper explores the tax-farming nature of China’s fiscally decentralized system and examines why the system incurs a particularly heavy financial burden on peasants. Specifically, it points out that a political hierarchy financed by a tax-farming system in China, fails to contain the exploitative behavior of local officials, which results in the expenditure devolution and revenue centralization within the hierarchy. Ultimately, peasants bear the brunt of the tax burden. As the financial pressure of excessive levies and fees reaches a perilous point, peasants are resorting to violent protests. Unless a fiscally decentralized system with horizontal accountability mechanisms evolves, the country’s ability to sustain a centralized polity may become increasingly undermined. A case study of township finance is used to exemplify the exploitative nature of China’s fiscal decentralization system.
The dissertation examines the political challenges of public utility reform through the analysis of urban water and sanitation services in Mexico. Decentralization of services to municipal governments was coupled with promotion of "market-based" policies in the 1980s and 1990s. However, the unpopularity of these policies provided political obstacles for mayors now charged with reforming the sector because many consumers were not accustomed to paying for water services. These policies--increased water prices, rigorous fee collection practices, and service suspension for non-payment--were political costs felt in the short-term, whereas the benefits of reform were long-term service improvements in water quality and quantity, reduced environmental pollution, and increased economic and social development. This problem of time inconsistency is a challenge even for pro-reform mayors because mayors in Mexico have a narrow window of time within which to enact policy. Mayoral administrations are three years long with no immediate re-election, and bureaucratic administrators follow the electoral cycle, which further exacerbates the challenge of long-term policymaking.Based on a comparative analysis of nine Mexican municipalities, I argue that mayors whose constituent base is primarily composed of middle and upper income consumers and business are more likely to reform because these groups are more able to pay short-term costs for long-term service improvements than the urban poor. With the support of a pro-reform mayor, reform is likely under two conditions: a) the presence of a water intensive industry and b) institutional support from the state government. Water intensive industry prioritizes improvement in service delivery, calculates costs based on the long run, and, further, has long-term financial and professional ties in the community. Water intensive industry is well positioned to support the policy process over time by participating in the leadership of the water utility board of directors. Also, water intensive industry can help offset the costs of reform because it pays more per cubic meter through a block tariff pricing scheme, a policy that subsidizes domestic consumers and helps to finance the reform agenda. Therefore, water intensive industry can lengthen the political problems of imposing costs in the short-term for mayors, lowering the costs to consumers before the long-term benefits of service improvements appear. Finally, state governments can provide legal, fiscal and technical resources that can help shorten the learning curve of incoming mayoral administrations. As such, state government can shorten the long-term planning of the reform process to make it more consistent with the shorter electoral cycle found at the municipal level. This research advances debates on policy adoption and implementation, highlighting the importance of political-business coalitional support as well as the role of inter-tier relations in maintaining policies over time.
Claudia Dziobek, Miguel Alves, Majdeline El Rayess, Carlos Alberto Gutierrez Mangas · 5 authors
A useful but little known feature of the IMF’s Government Finance Statistics Yearbook (GFSY) is the information on the structure of governments. Institutional tables, included in the GFSY, provide detail on the central, state, and local levels of governments, social security, and extrabudgetary units. We refer to the main levels of government as GL1, GL2, and GL3 in ascending order of institutional coverage. We present maps of the various levels of government for 74 countries to illustrate the usefulness of this database and make it more accessible to users. The maps provide information about how centralized or decentralized government finances and employment are and their size relative to the overall economy. Government map data facilitate the monitoring of fiscal policy and fiscal rules.
This paper provides an in-depth analysis of the relationship between fiscal decentralization and pro-poor outcomes based on the role of fiscal incentives. The literature on the relationship between fiscal decentralization and pro-poor outcomes is not well established in this area. A conceptual model is developed to explore in more detail this relationship, while endeavoring to illuminate the complexity of the issues involved for policy makers in developing countries. Four types of fiscal incentives are explored: namely, resources, responsibility, autonomy, and accountability. The paper then assesses the effectiveness of the Vietnamese system of fiscal decentralization for achieving pro-poor outcomes through a devolved system of fiscal incentives. The paper suggests that evidence from the Vietnamese case indicates that fiscal decentralization may contribute to poverty reduction outcomes, but does not provide evidence that fiscal decentralization is in and of itself inherently pro-poor. Rather, the lesson from Viet Nam is that if poverty reduction is an explicit objective for government, the system of fiscal decentralization should target pro-poor outcomes through an appropriate system of fiscal incentives. Since 2002, budgetary reallocation and income redistribution linked to poverty outcomes has been more strongly associated with equalizing fiscal transfers than with devolved finances in general. This represents a broadly correct approach to target poverty outcomes in a territorially unbalanced country like Viet Nam. Targeted transfers contribute to pro-poor outcomes by increasing the level of resources available to finance poverty spending. However, increasing the level of fiscal transfers for poverty spending will not ensure that fiscal transfers are then spent efficiently. In order to better realize these efficiency objectives, the government can promote greater fiscal and administrative decentralization of resources and responsibility to district- and commune-level governments. Further gains in this area must also be supported by greater levels of fiscal autonomy and fiscal accountability at the local government level.
The usual manner of describing inequality in a population, involves income distributions. China has experienced rapid income growth, led by reforms which have exacerbated income inequalities. Other components of well-being have been affected as well. Education and health care have become less accessible due to increased costs linked to the decentralization of the financing of such services. The changing face of inequality in China is therefore not confined to income. As such this paper applies new tools to the measure of multidimensional inequalities on wages, education and health. The multidimensional aspect is critical because there may be compensating effects of one form of inequality with respect to others which can change the evolution of overall inequality. Results are submitted to the values of parameters which are included in the formulation of new indices and which translate the Chinese population's aversion to inequalities and the weight it gives to the different dimensions considered. My results show that there has been a significant increase in inequality in China between 1997 and 2000, irrespective of the dimensions one focus on, and that this increase is robust to reasonable variations in the underlying parameters.
Only for the recipients of foreign aid is something akin to central planning seen as a way to achieve prosperity. The end of poverty is achieved with free markets and democracy—where decentralized “searchers” look for ways to meet individual needs—not Poverty Reduction Strategy Papers (PRSPs) to achieve Millennium Development Goals (MDGs). The PRSPs and MDGs create lots of bureaucracy but hold no one specific agency in foreign aid accountable for any one specific task. Planners in foreign aid use the old failed models of the past—the “Financing Gap”, the “poverty trap”, the government-to-government aid model; and the “expenditures = outcomes” mentality. Searchers in foreign aid would imitate the feedback and accountability of markets and democracy to provide goods and services to individuals until homegrown markets and democracy end poverty in the society as a whole. An example of the more promising “searchers” approach in foreign aid is 2006 Nobel Peace Laureate Mohammad Yunus and Grameen Bank.
What is best strategy to reach the Millennium Development Goal of basic education for all will depend on the specific country context.This paper introduces an input-output method to estimate the financial inputs required to achieve the MDG for primary education and an additional target of enhancing access to secondary education. 1As such the approach followed here is not new, but the innovative element is combining educational demand and supply variables considering both cost dimensions and quality of services as measured among others through test scores (outcomes), quality of school inputs and the nature of delivery of services (privatepublic, centralized or decentralized).We take the following analytical steps: (i) define a production function for specific education outputs (enrolment), (ii) isolate the main determinants of such output (considering both demand and supply factors); (iii) estimate costs per unit of producing such output, and -based on estimated elasticity's and unit costs ensuing from the education production function -(iv) calculate the financing needs of reaching key education goals.We find that determinants of access to schooling are significantly different for urban and rural and for poor and non-poor children.Furthermore, the determinants also differ when referring to access to primary or secondary education.Quality of school inputs does matter in all cases though to varying degree.Particularly, class size, shares of trained teachers and greater school autonomy (in hiring teachers and managing schools) are relevant.Quality of education outcomes, i.e. test scores, while very poor in Ecuador does not seem to influence school enrolment.The upshot is that with a more cost-effective use of resources for primary education, the MDG target of 100% of net primary school enrolment in urban areas is within reach in a period of 4 to 5 years at virtually no additional budgetary cost.Meeting the target for the rural population seems more complicated.In secondary education, important progress can be made to reach a target of 70% net enrolment (with important expected positive externalities for economic growth) by enhancing the share of trained teachers, expand coverage of school demand subsidies and improve class infrastructure.This target is within reach for the poor and non-poor urban population by 2007 at an estimated additional cost of 1 Vos is with the Institute of Social Studies (ISS), The Hague and the Free University Amsterdam.Ponce is with FLACSO-Ecuador and is also a PhD candidate at ISS.
The dominant role played by the state in the financing, regulation, and provision of primary and secondary education reflects the widely-held belief that education is necessary for personal and societal well-being. The economic organization of education depends on political as well as market mechanisms to resolve issues that arise because of contrasting views on such matters as income inequality, social mobility, and diversity. This book provides the theoretical framework necessary for understanding the political economy of education -- the complex relationship of education, economic growth, and income distribution -- and for formulating effective policies to improve the financing and provision of education. The relatively simple models developed illustrate the use of analytical tools for understanding central policy issues. After offering a historical overview of the development of public education and a review of current econometric evidence on education, growth, and income distribution, the authors lay the theoretical groundwork for the main body of analysis. First they develop a basic static model of how political decisions determine education spending; then they extend this model dynamically. Applying this framework to a comparison of education financing under different regimes, the authors explore fiscal decentralization; individual choice between public and private schooling, including the use of education vouchers to combine public financing of education with private provision; and the social dimension of education -- its role in state-building, the traditional "melting pot" that promotes cohesion in a culturally diverse society.
Laura B. Rawlings, Lynne Sherburne-Benz, Julie Van Domelen
The study seeks to answer four questions that summarize the fundamental issues in the international debate about the capacity of social funds to improve beneficiaries' living conditions: o Do social funds reach poor areas and poor households? Do social funds deliver high-quality, sustainable investments? Do social funds affect living standards? How cost-efficient are social funds and the investments they finance, compared with other delivery mechanisms? The findings and lessons from this research reflect a specific moment in the evolution of six social funds and therefore may not fully predict the future impact of current investments. The evaluation assesses subprojects identified and implemented between 1993 and 1999, a period when longer-term objectives-such as increasing access to and utilization of basic services-began to supplant the funds' original emergency mandates. The time period selected allowed enough elapsed time following the implementation of the social fund subprojects to make measurement of impact and sustainability possible. The evaluation does not consider the effects of social fund projects on employment or on income generation-the original objectives of the first generation of social funds, which were introduced in Latin America. It also does not discuss the effect of social fund investments on capacity building-a more recent emphasis of social funds seeking to assist decentralization and community development.
We model the links between skills and changes in work organization. As the proportion of skilled workers increases, the economy travels through a sequence of organizational equilibria. We show that as the relative supply of skills increases the organization of work becomes more decentralized. Both skilled and unskilled workers become more autonomous and perform a wider range of tasks: decentralization spreads across firms at the expense of the old centralized organization based on a strict division of labor. Moreover, as firms switch to decentralization, their employment structure becomes more homogeneous and wage inequality stops decreasing. These predictions are compared with empirical evidence based on French establishment‐level data and we find support for both of them. This suggests that the long‐term increase in the skill level of the workforce may have been one important factor driving the recent introduction of new work practices by a large number of firms.
The purpose of this paper is to examine the redistributive effects of interregional transfer of local taxes and grants from central to local government. We also examine the redistributive consequences of decentralization in the local public finance system. Especially, we focus on the impacts of the devolution of revenue instruments on the local governments. To analyze the redistributive effects, we employ the Reynolds-Smolensky index based on the Lorenz function and its decomposition. Our results show that the devolution of revenue instruments to local governments may increase the income differences among the regions
After the 1988 Constitution, as a consequence of an unplanned decentralization process, the increase of social expenditures by local governments has contributed to aggravate the financial situation of these governments. This aggravation poses a serious problem to the financing of social policies, thus threatening their future implementation and implying the worsening of social inequalities. This paper discusses the decentralization process of public policies and the federative equilibrium in Brazil.
The paper has two main objectives. The first is to trace the progress in the process of decentralisation in the provision of public services in India. The second is to test the hypothesis that decentralisation in the system of public service delivery in primary health care and education led to improved outcomes for the rural Indian population. Before 1992, with few exceptions, there was little movement towards decentralisation. Rural local bodies functioned primarily as program executing agents for government line departments, with little control over finances, administration, or the pattern of expenditure. The only decentralisation that existed was in the importance of state governments vis-à-vis the centre. After the 1992 Constitutional Amendments, significant progress has taken place in the form of the passing of conformity legislation by state governments, the setting up of State Finance Commissions to examine the distribution of resources from states to local bodies, and accelerated moves towards transfer of planning and expenditure responsibilities to village bodies. The paper used data from the 1994 NCAER survey to test the hypothesis that increased decentralisation/democratisation positively influences enrolment rates and child mortality once the influence of socioeconomic circumstances, civil society organisations, the problem of capture of local bodies by elite groups, and so on are controlled for. Our main empirical findings are that indicators of democratisation and public participation, such as frequency of elections, presence of non-governmental organisations, parent-teacher associations and indicator variables for decentralised states generally have the expected positive effects, although these are not always statistically indistinguishable from zero.