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Social funds and decentralisation: optimal institutional design

Author

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  • Faguet, Jean-Paul
  • Wietzke, Frank-Borge
Abstract
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.

Suggested Citation

  • Faguet, Jean-Paul & Wietzke, Frank-Borge, 2006. "Social funds and decentralisation: optimal institutional design," LSE Research Online Documents on Economics 2395, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:2395
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    File URL: http://eprints.lse.ac.uk/2395/
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    References listed on IDEAS

    as
    1. Faguet, Jean-Paul, 2004. "Does decentralization increase government responsiveness to local needs?: Evidence from Bolivia," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 867-893, March.
    2. Julie van Domelen, 2002. "Social funds: evidence on targeting, impacts and sustainability," Journal of International Development, John Wiley & Sons, Ltd., vol. 14(5), pages 627-642.
    3. Howard White, 2002. "Social funds: a review of the issues," Journal of International Development, John Wiley & Sons, Ltd., vol. 14(5), pages 605-610.
    4. Rao, Vijayendra & Ibanez, Ana Maria, 2003. "The social impact of social funds in Jamaica - a mixed-methods analysis of participation, targeting, and collective action in community-driven development," Policy Research Working Paper Series 2970, The World Bank.
    5. Soniya Carvalho & Gillian Perkins & Howard White, 2002. "Social funds, sustainability and institutional development impacts: findings from an OED Review," Journal of International Development, John Wiley & Sons, Ltd., vol. 14(5), pages 611-625.
    6. Jorgensen, Steen Lau & Van Domelen, Julie, 1999. "Helping the poor manage risk better : the role of social funds," Social Protection Discussion Papers and Notes 21333, The World Bank.
    7. Rodrigo Serrano, 2005. "Integrating Social Funds into Local Development Strategies : Five Stories from Latin America," World Bank Publications - Reports 11207, The World Bank Group.
    8. Arjan de Haan & Jeremy Holland & Nazneen Kanji, 2002. "Social funds: an effective instrument to support local action for poverty reduction?," Journal of International Development, John Wiley & Sons, Ltd., vol. 14(5), pages 643-652.
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    Cited by:

    1. Qaiser M. Khan & Jean-Paul Faguet & Christopher Gaukler & Wendmsyamregne Mekasha, 2014. "Improving Basic Services for the Bottom Forty Percent : Lessons from Ethiopia," World Bank Publications - Books, The World Bank Group, number 20001.
    2. World Bank, 2014. "Improving Basic Services for the Bottom Forty Percent : Results of the Poverty and Social Impact Assessment of Decentralized Basic Service Delivery in Ethiopia," World Bank Publications - Reports 17838, The World Bank Group.

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    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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