Fiscal Decentralization, Development, and Governance

California Institute Of Technology, Pasadena CA

Investigators

Abstract

Stable, well-functioning economies have the potential to allow nations to better serve the needs of their citizens. They also create an environment in which neighboring countries, such as the United States, can grow and prosper. One of the driving forces behind economic stability and performance is thought to be good governance, particularly significant fiscal decentralization. But cross-country analyses of the effects of decentralization on economic development and corruption reduction have produced contradictory findings. The result is that both theoretical and practical understanding of what promotes good governance and, thereby, economic stability and development, has lagged. The research supported by this award addresses this policy challenge through an in-depth, locally comparative, ethnographic investigation of the effects of a case of recent fiscal decentralization. The research is important because if the links between decentralization and good governance can be identified through an intensive study of a single case, findings can then be generalized to improve theoretical understanding and policy globally. The research will be conducted by anthropologist Dr. Jean Ensminger (California Institute of Technology). The researcher has identified Kenya as an excellent site for this study because the country has recently implemented a strong version of decentralization. The new governmental structure divides the nation into 47 counties each with a governor who controls significant fiscal resources. Theory that links decentralization to better economic performance in democratic countries rests on two unproven assumptions: that citizens will have improved access to information so that they can monitor the performance of their leaders, and that citizens value performance above other factors such as ethnic favoritism and patronage. This research tests these assumptions and theoretical predictions. Because of the inconsistent findings of quantitative studies of this problem, the researcher will take a largely qualitative and inductive approach. The researcher will collect data with a mix of qualitative and quantitative methods, including: interviews with governors, particularly those identified by civil society leaders as reformist; interviews with constituents and county-level government officials; analyses of longitudinal county-level records, voting records, and publicly available polling data; and analyses of reports of anti-corruption and audit bodies. Findings from the research should help policy makers understand whether a strong model of fiscal decentralization can offer a path forward for more effective policy. Results will also support better theoretical understanding of what promotes good governance and well-functioning economic systems. This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.