Making Decentralization Work: The Case of Russia, Ukraine, and Kazakhstan

Abstract

"This paper discusses key aspects of the decentralization process in these three important transition economies. With the complexities of the problems at hand, the analysis presented here cannot but be selective with regard to the issues addressed. With the potentially significant impact of decentralization on macroeconomic management and performance, it is crucial to identify and rectify adverse incentive mechanisms to ensure a sound and effective decentralized fiscal system. In the underlying analysis, particular attention has been accorded to identifying adverse incentive mechanisms inherent in the design of intergovernmentalfiscal relations. A common theme that runs through the analysis is that greater autonomy and accountability at the subnational level is a sine qua non of successful decentralization. The paper proceeds as follows: we identify three critical principles of sound decentralization which are then contrasted with actual policies in the three countries (section 2). On that basis, the paper offers views on the best way to proceed for the three countries (section 3). Section 4 concludes."