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Striking a Balance: Centralised and Decentralised Decisions in Government

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Abstract

This paper identifies factors to be looked at when considering the extent to which decisions within government should be centralised or decentralised. In practice, the solution is almost always likely to involve a balance between centralised and decentralised decision-making. Nevertheless there are a number of common factors that are generally applicable to questions of centralisation and decentralisation. This paper identifies those factors in order to provide some guidance for decisions regarding the location of decision rights. Rather than being prescriptive, the paper simply presents the relevant issues for consideration. Centralisation (or decentralisation) is a complex and multi-dimensional issue. It is partly for this reason that the paper does not suggest any specific solutions. The solution in any particular case will involve tradeoffs between the factors identified in the paper as well as value judgements regarding the ranking of the various factors. In determining the appropriate balance between centralised and decentralised decisions, various factors are in tension. Centralisation can help ensure uniform and consistent standards, minimise inequalities, avoid the duplication of services, allow for the achievement of economies of scale, and increase coherence and coordination. Decentralisation, on the other hand, can help enhance local autonomy and empowerment, encourage customisation and innovation, and increase participation. Economic, social, managerial and constitutional perspectives offer a number of theoretical frameworks that are useful in considering issues of centralisation/ decentralisation. This paper draws together ideas from across these perspectives. It concludes that the solution is likely to be characterised by a “tight/loose” pattern whereby there is “tight” or centralised control over the major objectives that is then joined by “loose” or decentralised discretion over the ways in which those objectives are achieved to varying degrees.

Suggested Citation

  • Natalie Brady, 2002. "Striking a Balance: Centralised and Decentralised Decisions in Government," Treasury Working Paper Series 02/15, New Zealand Treasury.
    • Handle: RePEc:nzt:nztwps:02/15
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    File URL: https://treasury.govt.nz/sites/default/files/2007-09/twp02-15.pdf
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    References listed on IDEAS

    as
    1. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64(5), pages 416-416.
    2. Kevin Guerin, 2002. "Subsidiarity: Implications for New Zealand," Treasury Working Paper Series 02/03, New Zealand Treasury.
    3. Suzi Kerr & Megan Claridge & Dominic Milicich, 1998. "Devolution and the New Zealand Resource Management Act," Treasury Working Paper Series 98/07, New Zealand Treasury.
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    More about this item

    Keywords

    Centralisation; decentralisation; decision rights;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H19 - Public Economics - - Structure and Scope of Government - - - Other

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