FISCAL DECENTRALIZATION AND INTERGOVERNMENTAL TRANSFERS IN LESS-DEVELOPED-COUNTRIES

This article addresses the issue of fiscal decentralization in develop ing countries, and the use of intergovernmental transfers to achieve t his objective. We find that developing countries have more centralized fiscal structures and argue that this is consistent with the theory o f fiscal federalism. Economic development, however, does push the adva ntage toward decentralization. We also show that developing countries use a wide variety of transfer instruments to fund local governments, and that these instruments give the national government varying degree s of control over local government finances.