Economists have theoretically shown that decentralization of governance promotes growth and development. However, this is not so according to the empirical evi-dence which sometimes shows divergent results. In the meantime, more and more countries decentralize their governance. This article reviews Sri Lanka's experience of decentralization during the past 15 years. The article compares the pre- and post- decentralized economic status under Provincial Councils and examines the relationship of the degree of decentralization with poverty and the per capita income of the country. Findings show that the actual degree of decentralization is very low and it is not significantly conducive to increase per capita income, there is a huge imbalance in development among regions, and public officials at lower layers of government are not competent to reap the benefits of decentralization. For the effective functioning of decentralized governance in developing countries, the article recommends, first, to empower lower layers of government with more clearly defined functions that do not overlap with the central government; second, to develop a proper mechanism enabling lower tiers of government to reap the benefits of decentralization; third, to take prompt action to enable public officials to be familiar with the decentralized role of the state and principles of public expenditure.
Adams, Roy D. (1980), ‘ Income Effects and Club Size: Some Comments ’, Public Finance, 35: 450–54 .
2.
Adams, Roy D. and J.S. Royer (1977), ‘ Income and Price Effects in the Economic Theory of Clubs ’, Public Finance, 32(2): 141–58 .
3.
Bahl, Roy W. (1999), ‘Fiscal Decentralization’, http://www-wbweby.worldbank.org/courses/ebel/ryl.html.
4.
Bahl, Roy W. and J.F. Linn (1992), Urban Public Finance in Developing Countries. Oxford: Oxford University Press .
5.
Bardhan, P. (2002), ‘ Decentralization of Governance and Development ’, Journal of Economic Perspectives, 4(16): 185–205 .
6.
Bird, Richard M. (1993), ‘ Threading the Fiscal Labyrinth: Some Issues in Fiscal Decentralization ’, National Tax Journal, 46(2): 207–27 .
7.
Bird, Richard M. , C.L. Freund and Christine I. Wallich (1995), ‘ Decentralising Fiscal Systems in Transition Economics ’, Finance and Development, 32(3): 31–34 .
8.
Bruno, M. and B. Pleskovic (eds) (1996), Annual World Bank Conference on Development Economics. Washington D.C.: The World Bank.
9.
Buchanan, James (1965), ‘ An Economic Theory of Clubs ’, Economica, 32(125): 1–14 .
10.
Central Bank of Sri Lanka, Annual Report, Various Issues, Colombo.
11.
Central Bank of Sri Lanka (1999), Report on Consumer Finances and Socio-economic Survey of Sri Lanka: 1996/97, Part II, Central Bank of Sri Lanka, Colombo .
12.
Cheema, G. Shabbir and Dennis A. Rondinelli (eds) (1983), Decentralization and Development: Policy Implementation inDeveloping Countries. New Delhi: Sage Publications .
13.
Davoodi, Hamid and Heng-fu Zou (1998), ‘ Fiscal Decentralization and Economic Growth: A Cross Country Study ’, Journal of Urban Economics, 43(1): 244–57 .
14.
Department of Census and Statistics (1998), Statistical Abstract of the Democratic Socialist Republic of Sri Lanka 1997, Ministry of Finance and Planning, Colombo .
15.
Department of Census and Statistics (2000), Household Income and Expenditure Survey: 1995–96, Final Report, Ministry of Finance and Planning, Colombo .
16.
Department of Census and Statistics (2004), Household Income and Expenditure Survey: 2002, Ministry of Finance and Planning, Colombo .
17.
Dillinger, William (1994), Decentralization and Its Implications for Urban Service Delivery, Urban Management Programme Discussion Paper 16, World Bank, Transportation, Water, and Urban Development Department, Urban Development Division, World Bank, Washington, D.C.
18.
Dillinger, William and Marianne Fay (1999), ‘ From Centralized to Decentralized Governance ’, Finance and Development, 36(4): 19–21 .
19.
Fernando, Austin (1994), ‘Provincial – Local Relations and Their Implications for Public Accountability’, in Gunapala Nanayakkara (ed.), Public Accountability and the Role of the Citizen in Government, pp. 73–84. Colombo: Postgraduate Institute of Management of University of Sri Jayawrdenepura .
20.
Hanushek, Eric A. (1986), ‘The Economics of Schooling: Production and Efficiency in Public Schools’, Journal of Economic Literature, 35: 1141–77 .
21.
Hanushek, Eric A. (1995), ‘ Interpreting Recent Research on Schooling in Developing Countries ’, World Bank Research Observer, 10(2): 227–46 .
22.
Herath, H.M.T.N.R. (2001), ‘Multiple Essays in Public Finance: Theory and Practice of Decentralization’, unpublished Ph.D. thesis. Colombo: University of Colombo.
23.
Human Development Report in South Asia 1999, Karachi: Oxford University Press .
24.
Hyden, G. and M. Bratton (eds) (1992), Governance and Politics in Africa. Boulder, CO: Lynne Rienner .
25.
International Encyclopedia of the Social Sciences (1968), Vols 1 & 2. New York: The Macmillan Company and The Free Press .
26.
International Monetary Fund (1996), Government Finance Statistics Yearbook. Washington D.C.: IMF .
27.
International Monetary Fund (1997), International Financial Statistics. Washington D.C.: IMF .
28.
Jin, Jing and Heng-fu Zou (2005), ‘ Fiscal Decentralization, Revenue and Expenditure Assignments, and Growth in China ’, Journal of Asian Economics, 6(16): 1047–64 .
29.
Leitan, G.R.T. (1979), Local Government and Decentralised Administration in Sri Lanka. Colombo: Lake House Investments Ltd .
30.
Ministry of Education and Higher Education (1993), Educational Statistics of Sri Lanka 1992, The Policy, Planning and Review Division of the Ministry of Education and Higher Education, Colombo .
31.
Ministry of Education and Higher Education (2003), Schools Census 2003: Preliminary Report, Colombo.
32.
National Human Development Report (1998), Regional Dimensions of Human Development, 1998, UNDP, Colombo .
33.
Oates, Wallace E. (1972), Fiscal Federalism. New York: Harcourt, Brace, Jovanovich .
34.
Oates, Wallace E. (1993), ‘ Fiscal Decentralization and Economic Development ’, National Tax Journal, 46(2): 237–43 .
35.
Oates, Wallace E. (1994), ‘Federalism and Government Finance’, in John M. Quigley and Eugene Smolensky (eds), Modern Public Finance, pp. 126–51. Cambridge, MA: Harvard University Press .
36.
Prudhomme, Remy (1995), ‘ The Dangers of Decentralization ’, The World Bank Research Observer, 10(2): 201–20 .
37.
Rondinelli, Dennis (1981), ‘ Government Decentralisation in Comparative Perspective: Theory and Practice in Developing Countries ’, International Review of Administrative Science, 48(2): 133–45 .
38.
Rondinelli, Dennis A. and G.S. Cheema (1983), ‘Implementation Decentralization Policies: An Introduction’, in G. Shabbir Cheema and Dennis A. Rondinelli (eds), Decentralization and Development: Policy Implementation in Developing Countries, pp. 9.34. Beverly Hills: Sage Publications .
39.
Rondinelli, Dennis A. , J.R. Nellis and G.S. Cheema (1984), ‘Decentralization in Developing Countries: A Review of Recent Experience’. World Bank Staff Working Paper, No. 581, World Bank, Washington, D.C.
40.
Sanderatne, N. (1994), ‘Reflections on Accountability of Public Expenditure’, in Gunapala Nanayakkara (ed.), Public Accountability and the Role of the Citizen in Government, pp. 38–54. Colombo: Postgraduate Institute of Management of University of Sri Jayawardenepura .
41.
Sherwood, F. (1969), ‘Devolution as a Problem of Organisation Strategy’, in R.T. Daland (ed.), Comparative Urban Research. Beverly Hills: Sage .
42.
Smith, B.C. (1985), Decentralization: The Territorial Dimension of the State. London: George Allen & Unwin .
43.
Tanzi, Vito (1996), ‘ Fiscal Federalism and Decentralization: A Review of Some Efficiency and Macroeconomic Aspects ’, in Annual World Bank Conference on Development Economics 1995, World Bank, Washington D.C., pp. 295–316 .
44.
Ter-Minassian, Teresa (1997a), ‘ Decentralizing Government ’, Finance and Development, 34(3): 36–39 .
45.
Ter-Minassian, Teresa (1997b), ‘Intergovernmental Fiscal Relations in a Macroeconomic Perspective: An Overview’, in Teresa Ter-Minassian (ed.), Fiscal Federalism in Theory and Practice, pp. 3–24. Washington, D.C.: IMF .
46.
The Constitution of the Democratic Socialist Republic of Sri Lanka – 1978, 1987, Government Press, Colombo .
47.
United Nations (1991), Fiscal Decentralization and Mobilization and Use of National Resources for Development: Issues, Experience and Policies in the ESCAP Region, United Nations, New York .
48.
Wijeweera, B.S. (1994), ‘Decentralization in Sri Lanka: A Concept in Historical Perspective’, in Gunapala Nanayakkara (ed.), Public Accountability and the Role of the Citizen in Government, pp. 55–62. Colombo: Postgraduate Institute of Management of University of Sri Jayawardenepura .
49.
Woller, G.M. and K. Phillips (1998), ‘ Fiscal Decentralization and LDC Economic Growth: An Empirical Investigation ’, Journal of Development Studies, 34(4): 139–48 .
50.
World Bank (1992), Governance and Development. Washington, D.C.: World Bank .
51.
World Bank (1997), World Development Report 1997: The State in a Changing World. New York: Oxford University Press .
52.
World Bank (2000), Sri Lanka: Recapturing Missed Opportunities , Report No. 20430-CE.
53.
Zhang, Tao and Heng-fu Zou (1998), ‘ Fiscal Decentralization, Public Spending, and Economic Growth in China ’, Journal of Public Finance, 67: 221–40 .
