Decentralization in Colombia
Alberto Carrasquilla () and
Juan Echavarría ()
Working Papers Series. Documentos de Trabajo from Fedesarrollo
In the 1990’s descentralization in Colombia, a process which had begun a decade earlier, was sharply accelerated. The percentage of current Central Government revenues that are automatically transferred to the regional governments quickly jumped from about 20% to over 40%. Many analysts attribute the sharp fiscal deterioration experienced in the country to this decision. Regional governments, indeed, accumulated substantial amounts of debt and currently face serious financial difficulties. This paper is policy oriented. After a discussion of the central issues associated with descentralization in general, we turn to the specific case of Colombia. Our analysis highlights three aspects: (a) the rules that govern how a particular region’s transfers are defined. (b) the rules that govern how these resources must be spent and (c) the rules governing a regional government’s ability to issue debt. Rules governing how a region receives transfers from the central government have several problems. Firstly, they are not linked to any explicit and simple consideration of its contribution to total central government revenues, they lack simple redistributive criteria (from richer to poorer regions) and they do not sufficiently reward regional fiscal performance. Our proposals seek to correct these three deficiencies. Second, the rules that govern expenditures by the regional governments are too tight. We propose sharply reducing the constraints that face majors and governors. Third, the ability to run deficits and issue debt, in a context that includes moral hazard, has already become a source of problems. We propose a balanced budget rule for regional governments. We also argue in favor of reelection of the regional authorities (mayors and governors) as an incentive mechanism that enhances the effects of these reforms.
Keywords: Descentralización; Economía Institucional; Reformas Institucionales; Colombia (search for similar items in EconPapers)
JEL-codes: E62 H77 P11 P16 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:col:000123:002254
Access Statistics for this paper
More papers in Working Papers Series. Documentos de Trabajo from Fedesarrollo
Bibliographic data for series maintained by Lucía Fenney Pérez ().