They Matter?

The decentralization of revenue sources and expen-diture responsibilities to subnational levels of gov-ernment can increase the efficiency of spending, and increase participation in decision making by local constituents. It is also true, however, that decentralization can result in inequities in service delivery among citizens of the same country depending on where they live. While decentraliza-tion need not cause these inequities, devolution of revenue sources, combined with disparities in endowments of regions, is likely to lead to dispari-ties in fiscal resources at the subnational level. If left alone, these disparities could lead to either lower levels of services in fiscally poor regions or higher tax rates for similar levels of government services in those regions. In turn, disparities in service delivery could thwart poverty alleviation efforts, as public services that are usually provided at the subnational level, such as primary health and education, are critical in empowering the poor. Disparities in the level and quality of these services could therefore eventually perpetuate inequalities in income levels, or at least delay conversion of incomes across regions. Large fiscal disparities could also induce migration to regions that have higher revenues and better services, even thoug