ABSTRACT
A number of developments are prompting most developing countries to examine the roles of governments, the private sector, and civil society as partners in development. This chapter examines the reasons for this rekindling of an interest in fiscal rearrangements in both industrial and nonindustrial countries. It illustrates the debate on decentralization by providing empirical evidence on the decentralization experience. The chapter focuses on general and institutional lessons to enhance understanding of the effectiveness of decentralization in fostering an environment of listening, learning, and evaluation for responsive and accountable governance. It argues that decentralized fiscal structures are more suitable in the institutional environment of developing countries provided careful attention is paid to the design of institutions vital to the success of decentralization policies. These institutions include, especially, the rule of law, conflict resolution and coordination, the charter of rights, effective limitations on the authority of governments beyond their designated spheres of influence, accountability, and institutional capacity for evaluation at all levels.
