What works in public sector reform is highly context dependent. Explicit evidence that one approach to decentralization or localization might be more effective than others in achieving development results is limited (Smoke et al, 2013). While decentralization is being pursued by countries around the world, decentralization processes and reforms of intergovernmental (fiscal) systems are not a linear process. Indeed, Wallace Oates (2005) suggests that
“Contrasting forces, some leading to increased fiscal centralization and some to greater decentralization, are producing an ongoing restructuring of public sectors throughout the world.”
From a technical viewpoint, public sector management reforms seek to improve public sector results by changing the way that governments work (World Bank 2012). Whereas most public sector reforms are initiated upstream by core central ministries, it is downstream where the public sector delivers outputs that directly matter to citizens and firms. As such, sustainable decentralization reforms require that thousands of public agents alter their behavior.
A final takeaway is that during the design and implementation of major decentralization reforms, or in the subsequent fine-tuning of intergovernmental relations, political and institutional incentives may be at odds with improving public sector performance. It is not unusual for central government politicians and bureaucrats to support the concept of decentralization during the policy formulation stage only to oppose its implementation when the reforms threaten to limit their own political, financial, or institutional powers. As such, understanding the wider context of decentralization reforms, including its political, administrative, and fiscal dimensions, through a political economy lens is critical to understanding the real-world opportunities and potential limitations to a more decentralized public sector.