Has decentralization worked?

The focus in this chapter is on what the empirical evidence tells us about why countries have decentralized and what the impact of fiscal decentralization has been. We review why the data is limited, but nonetheless note that it suggests some conclusions about why some countries are more decentralized than others, and why decentralization is likely to be more fully developed in larger and higher-income countries than in smaller and poorer countries. However, when it comes to questions about the impact of fiscal decentralization on economic development, on the well-being of the population, and on the size and quality of government, the evidence gives no clear answers. Decentralization appears have had some positive impacts in some countries – but not always or everywhere. Experience to date suggests that there are some common traps and obstacles that lead to less favorable outcomes, and much of the rest of this book in effect suggests guidelines that countries wanting better outcomes should follow.