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Equalising Spending Needs of Subnational Governments in a Developing Country: The Case of Tanzania

Author

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  • Maarten A Allers

    (Faculty of Economics and Business, and Centre for Research on Local Government Economics, University of Groningen, PO Box 800, 9700 AV Groningen, The Netherlands)

  • Lewis J Ishemoi

    (The Institute of Finance Management, Dar Es Salaam, and University of Groningen, PO Box 800, 9700 AV Groningen, The Netherlands)

Abstract

Decentralisation of government creates fiscal disparities: some subnational governments can provide their citizens with more public services than others. Many countries try to equalise fiscal disparities by targeting grants at disadvantaged jurisdictions. This is especially difficult for developing countries, where data are scarce. We develop a method to estimate spending needs of local governments in developing countries. We apply this method to health spending by Tanzanian districts, but it can be used in other areas and other countries as well. We use our estimates to derive an equalising grant allocation formula. A comparison with the existing grant allocation indicates that more deprived districts should receive higher grants than they obtain now.

Suggested Citation

  • Maarten A Allers & Lewis J Ishemoi, 2011. "Equalising Spending Needs of Subnational Governments in a Developing Country: The Case of Tanzania," Environment and Planning C, , vol. 29(3), pages 487-501, June.
    • Handle: RePEc:sae:envirc:v:29:y:2011:i:3:p:487-501
    DOI: 10.1068/c09192r
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    References listed on IDEAS

    as
    1. Richard Bird & François Vaillancourt, 2007. "Expenditure-Based Equalization Transfers," Springer Books, in: Jorge Martinez-Vazquez & Bob Searle (ed.), Fiscal Equalization, chapter 0, pages 259-289, Springer.
    2. Maarten Allers & Lewis Ishemoi, 2011. "Do Formulas Reduce Political Influence on Intergovernmental Grants? Evidence from Tanzania," Journal of Development Studies, Taylor & Francis Journals, vol. 47(12), pages 1781-1797.
    3. Alan Duncan & Peter Smith, 1995. "Modelling local government budgetary choices under expenditure limitation," Fiscal Studies, Institute for Fiscal Studies, vol. 16(4), pages 95-110, November.
    4. Jameson Boex & Jorge Martinez-Vazquez, 2007. "Designing Intergovernmental Equalization Transfers with Imperfect Data: Concepts, Practices, and Lessons," Springer Books, in: Jorge Martinez-Vazquez & Bob Searle (ed.), Fiscal Equalization, chapter 0, pages 291-343, Springer.
    5. Jesus Perez-Mayo, 2005. "Identifying deprivation profiles in Spain: a new approach," Applied Economics, Taylor & Francis Journals, vol. 37(8), pages 943-955.
    6. Akai, Nobuo & Sakata, Masayo, 2002. "Fiscal decentralization contributes to economic growth: evidence from state-level cross-section data for the United States," Journal of Urban Economics, Elsevier, vol. 52(1), pages 93-108, July.
    7. Jorge Martinez-Vazquez & Bob Searle, 2007. "Challenges in the Design of Fiscal Equalization and Intergovernmental Transfers," Springer Books, in: Jorge Martinez-Vazquez & Bob Searle (ed.), Fiscal Equalization, chapter 0, pages 3-10, Springer.
    8. Giancarlo Pola & George France & Rosella Levaggi (ed.), 1996. "Developments in Local Government Finance," Books, Edward Elgar Publishing, number 799.
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