Does Fiscal Decentralization Enhance Citizens’ Access to Public Services and Reduce Poverty? Evidence from Côte d’Ivoire Municipalities in a Conflict Setting

Abstract

Fiscal decentralization has been implemented in many countries with an explicit objective of improving public service delivery and reduce poverty. However, its effectiveness in achieving these goals are much debated and the empirical literature has mostly focused on poverty reduction using cross-country analysis.

This paper analyses whether, and how, the devolution of revenue raising responsibilities to Côte d’Ivoire’ municipalities enhances access to public services and contributes to reducing poverty. Local revenue sources that reflect municipalities’ autonomy in decision-making are considered to measure revenue decentralization. An adjusted multidimensional poverty index for access to public services and a headcount poverty index are also calculated at the local level using the Household Living Standard Survey. The empirical analysis uses a grouped fixed effect approach, combined with a two-stage least squares methodology with panel corrected standard errors clustered by département to address both time-varying heterogeneity and local revenue endogeneity.

Our study finds that increased local revenue positively affects access to public services and reduces poverty. However, there is evidence that revenue decentralization has a more robust effect on access to public service, than on poverty. This effect seems to work mainly through enhancing access to education more than access to health, water, and sanitation services. Interestingly, our results indicate that municipalities are more likely to improve access to public services in less ethnically diverse localities and in urban zones. The study shows that the conflict has compounded the existing problems of access to public services with no statistically significant effect on poverty.