Harald Fuhr

• This paper focuses on some of the factors explaining recent trends in decentralisation, and some areas where decentralisation has had a positive impact, including bringing citizens into public affairs, improving sub-national public administration, and stimulating local economic development. It concludes by exploring the dangers and the implications for governments of differing capabilities starting out on the decentralisation path. More specifically, the paper stresses the underlying incentive structures within states in reform. It suggests a country-specific discussion of both vertical and horizontal incentive structures in decentralisation, as well as clear-cut accountability within a public sector in change. While vertical incentive structures mean defined rules for intergovernmental relationships, horizontal incentive structures mean defined rules between local governments, their citizens and the local private sector. Both sets of incentives need to be reformed jointly to stimulate better results from decentralisation and forThis paper focuses on some of the factors explaining recent trends in decentralisation, and some areas where decentralisation has had a positive impact, including bringing citizens into public affairs, improving sub-national public administration, and stimulating local economic development. It concludes by exploring the dangers and the implications for governments of differing capabilities starting out on the decentralisation path. More specifically, the paper stresses the underlying incentive structures within states in reform. It suggests a country-specific discussion of both vertical and horizontal incentive structures in decentralisation, as well as clear-cut accountability within a public sector in change. While vertical incentive structures mean defined rules for intergovernmental relationships, horizontal incentive structures mean defined rules between local governments, their citizens and the local private sector. Both sets of incentives need to be reformed jointly to stimulate better results from decentralisation and for better performance of local government. Neglecting one of them, could harm development. Above all, politics and processes are key to understanding, and eventually, managing decentralisation effectively.…