The Difficulty in Measuring Decentralization: The Importance of Context and Path Dependency

This paper addresses how decentralization, encompassing political, administrative, and fiscal dimensions, is subject to varied interpretations by policymakers and research. At present, a robust knowledge base has been developed on how to go about measuring these separate dimensions of decentralization, much of which is metrics-based. These metrics are typically ratios and indexes, both simple and complex, that are, indeed, useful in addressing a wide range of analytical questions. An important feature of this current state of measurement art has been a focus on developing cross-country indicators of decentralization. This type of information is most important not only for securing agreement on the definitions and degrees of intergovernmental fiscal 'autonomy' across types of governments but also in establishing benchmarks for assessing whether the theoretical outcomes promised by/expected from decentralization are accomplished. But measurement is about more than the metrics of ratios and cross-country databases. Understanding what decentralization is and whether it 'works' requires a multi-dimensional approach to understanding 'fiscal autonomy.' And to get a full understanding of that, the analyst must take a public sector reform path-dependent country-by-country context examination that includes along with the metrics, a qualitative assessment of the features and practice of intergovernmental financial management. The purpose of this paper is to illustrate what a multi-dimensional analysis will entail.