ABSTRACT
A large and growing number of countries around the globe are re-examining the roles of various levels of government and their partnership with the private sector and the civil society with a view to creating governments that work and serve their people (see Shah, 1998 for motivations for such a change). The overall thrust of these changes manifest a trend towards either devolution (empowering people) and/or localization (decentralization). Localization has been pursued through varying combinations of political, administrative, and fiscal decentralization initiatives. Political or democratic decentralization implies directly elected local governments (thereby making elected officials accountable to citizens). Administrative decentralization empowers these governments to hire and fire local staff (thereby making local officials accountable to elected officials) without any reference to higher level governments and fiscal decentralization entrusts these governments fiscal autonomy in their spheres of taxing and spending responsibilities. Fiscal decentralization ensures that elected officials weigh carefully the joys of spending someone else’s money as well as pains associated with raising revenues from the electorate and facing the possibility of being voted out of office.
