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More Than You Can Handle : Decentralization and Spending Ability of Peruvian Municipalities / Loayza, Norman V.
World Bank Open Knowledge Repository (formerly "World Bank E-Library Publications") Available online
View online- Format:
- Book
- Government document
- Author/Creator:
- Loayza, Norman V.
- Series:
- Policy research working papers.
- World Bank e-Library.
- Language:
- English
- Subjects (All):
- Capacity.
- Debt Markets.
- Decentralization.
- Governance.
- Macroeconomics and Economic Growth.
- Municipal Financial Management.
- Political Economy.
- Poverty Reduction.
- Public Sector Expenditure Policy.
- Spending.
- Subnational Economic Development.
- Local Subjects:
- Capacity.
- Debt Markets.
- Decentralization.
- Governance.
- Macroeconomics and Economic Growth.
- Municipal Financial Management.
- Political Economy.
- Poverty Reduction.
- Public Sector Expenditure Policy.
- Spending.
- Subnational Economic Development.
- Physical Description:
- 1 online resource (34 pages)
- Other Title:
- More Than You Can Handle
- Place of Publication:
- Washington, D.C., The World Bank, 2011
- System Details:
- data file
- Summary:
- In the past three decades, emerging countries have gone through extensive decentralization reforms. Yet, there are no studies assessing quantitatively the relative importance of various factors known to affect the success of decentralization. This paper builds on a comprehensive dataset the authors constructed for Peru, which merges municipal fiscal accounts with information about municipalities' characteristics such as population, poverty, education, and local politics. The paper then analyzes the leading factors affecting the ability of municipalities to execute the allocated budget using complementary methodologies, from least squares to quantile regression analyses. According to the existing literature and the Peruvian context, the analysis divides these factors into four categories: the budget size and allocation process; local capacity; local needs; and political economy constraints. Although 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.
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