Measuring Decentralization and the Local Public Sector: A Survey of Current Methodologies

Measuring Decentralization and the Local Public Sector: A Survey of Current Methodologies Faigy Abdelhak, Jihyun Chung, Jingqiang Du and Valerie Stevens IDG Working Paper No. 2012-01 March 2012 IDG Working Paper No. 2012-01: Measuring Decentralization: Current Methodologies Measuring Decentralization and the Local Public Sector: A Survey of Current Methodologies Faigy Abdelhak, Jihyun Chung, Jingqiang Du and Valerie Stevens March 2012 Abstract This short note provides an overview of the current and previous attempts to systematically measure—and collect data on—the scope and nature of (political, administrative, and fiscal) decentralization in countries around the world. Despite the considerable quantity of scholarship devoted to the investigation of the causes and effects of decentralization, the current efforts to collect data on the various aspects of decentralization and local governance have not given rise to a single authoritative methodology. In addition, coverage of the existing data collection efforts across developing and transition countries is poor. Despite the fact that about half of the developing and transition countries around the world interact with the people through non-devolved approaches, none of the current efforts to measure local public sector finances considers any non-devolved decentralized financing mechanisms, such as deconcentration or delegation. This void in the data with regard to decentralization provides policy makers and the research community with a considerably incomplete patchwork of information regarding decentralization, rather than resulting in a single, consistent, and robust dataset regarding the depth and breadth of decentralization in countries around the world. IDG Working Paper No. 2012-01: Measuring Decentralization: Current Methodologies 1 Measuring Decentralization and the Local Public Sector: A Survey of Current Methodologies Faigy Abdelhak, Jihyun Chung, Jingqiang Du, and Valerie Stevens March 2012 1. Introduction Decentralization is a concept that is not easy to define, and perhaps even harder to measure (Treisman, 2002; Boex and Simatupang, 2010). A number of quantitative and qualitative measures have been used in attempts to reliably measure the level of (political, administrative, and—especially—fiscal) decentralization across countries. Multilateral development agencies have been particularly active in the collection of data that might provide some insight into public sector activities below the central government level. While the tools developed to date are useful to an extent, they suffer from a number of weaknesses, including poor coverage and poor comparability. Our understanding of the causes and effects of decentralization in developing countries has been considerably limited as a result of the absence of a single global dataset that has applies a consistent methodology and provides sound, consistent, and comparable information about the political, institutional and fiscal nature of the state and local governments around the world. Even the International Monetary Fund’s (IMF) Government Finance Statistics—one of the most-used data sources for measuring (fiscal) decentralization- provides quite limited coverage across developing economies. In fact, the list of 67 countries for which subnational maps of government were recently prepared by the IMF (2011) contains only 4 Asian countries, 3 African countries, and 2 countries in the Middle East and North Africa (MENA) region. In addition to these coverage concerns, the existing decentralization measures further fall short when the understanding of decentralization is broadened to include the activities of more than just devolved sub-central government entities. In about half the developing countries around the world, key public services are delivered in a deconcentrated manner, where the local public sector is formed by subnational departments (or territorial units) of the state administration which report upward but are tasked to deliver public services at the local level (Boex 2011). In contrast to devolved finances, information on deconcentrated expenditures is often not collected by international financial institutions or development agencies. The IMF (2001) implies that an important reason for this is that devolved financial data are generally produced in the ordinary course of operations for legally separate subnational entities, and it is much simpler to collect this readily-available information instead of developing norms and methodologies to define what IDG Working Paper No. 2012-01: Measuring Decentralization: Current Methodologies 2 constitutes subnationa