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Social funds and decentralisation: optimal institutional design
Author(s) -
Faguet JeanPaul,
Wietzke FrankBorge
Publication year - 2006
Publication title -
public administration and development
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.574
H-Index - 44
eISSN - 1099-162X
pISSN - 0271-2075
DOI - 10.1002/pad.413
Subject(s) - decentralization , incentive , context (archaeology) , politics , public economics , government (linguistics) , business , sustainability , economics , dual (grammatical number) , local government , economic system , public administration , political science , microeconomics , market economy , art , paleontology , ecology , linguistics , philosophy , literature , law , biology
Most of the 60+ developing countries that have established social funds (SFs) are decentralising their governments as well. But the question of how to tailor SFs—originally a highly centralised model—for a decentralising context has received relatively little attention in the literature. We first examine evidence on the ability of SFs to adapt to a decentralised context. We then lay out the implications of decentralisation for SF institutional design step‐by‐step through the project cycle. The topic is doubly important because social funds can increase their effectiveness, and the sustainability of their investments, by reorganising internal processes to take advantage of the political and civic institutions that decentralisation creates. Local government has an informational advantage in local needs and characteristics (time and place), whereas SFs have access to better technology and knowledge of sectoral best practice. The key is to create institutional incentives that best combine these relative advantages. Copyright © 2006 John Wiley & Sons, Ltd.