New Rules for Implementation of Fiscal Decentralization

Abstract

This paper reviews the issue of how well fiscal decentralization has been implemented and how successful these projects have been in achieving a new level of local government financial capacity and service delivery. It reviews the most recent research literature that has assessed the success and failure rates of fiscal decentralization in a global and Central and Eastern European context. Overall, the levels of success have not been encouraging with fiscal decentralization having a positive impact. Professor Roy Bahl in a 1999 paper titled “Implementation Rules for Fiscal Decentralization” defined the basic approach to implementing fiscal decentralization and many of these rules have found been the guiding principles for implementing fiscal decentralization. This paper addresses the deficiencies in these rules based on the experiences over the past decades and formulates new rules for implementing fiscal decentralization. The paper concludes that new rules need to be formulated and encourages more dialogue and discussion among researchers and practitioners engaged in implementing fiscal decentralization.