ABSTRACT
Fiscal decentralization is in vogue. Both in the industrialized and in the developing world, nations are turning to devolution to improve the performance of their public sectors. In the United States, the central government has turned back significant portions of federal authority to the states for a wide range of major programmes, including welfare, Medicaid, legal services, housing, and job training. The hope is that state and local governments, being closer to the people, will be more responsive to the particular preferences of their constituencies and will be able to find new and better ways to provide these services. In the United Kingdom, both Scotland and Wales have opted under the Blair government for their own regional parliaments. And in Italy the movement toward decentralization has gone so far as to encompass a serious proposal for the separation of the nation into two independent countries. In the developing world, we likewise see widespread interest in fiscal decentralization with the objective of breaking the grip of central planning that, in the view of many, has failed to bring these nations onto a path of self-sustaining growth.
