“Decentralization” is a widely used term that lacks a precise definition. Generally, decentralization refers to the transfer of specific types of decision-making authority from a central or higher-level entity to subordinate field, regional, and/or local entities. That is, a national government or central government might transfer, constitutionally or legislatively, certain decision-making authority to regional (e.g., provincial) or local (e.g., municipal) governments. Similarly, agencies of a national or central government might transfer certain decision-making authority to their own field offices or to agencies of regional or local governments. Decision-making authority might be transferred, as well, to special regional or functional authorities or to public corporations and enterprises. Within the private sector, decentralization refers to transfers of decision-making authority from a firm’s headquarters to a firm’s divisions or subsidiaries. Hence, decentralization ordinarily involves transfers of decision-making authority to geographically dispersed entities that are presumably closer to, more knowledgeable about, and more responsive to citizens, voters, clients, customers, or suppliers. Some observers also define decentralization as including transfers of decision-making authority from government to private organizations (e.g., for-profit and nonprofit corporations, nongovernmental organizations, and civic associations). However, such transfers are more often referred to as the privatization of public functions. Privatization may or may not involve decentralization, depending on the degree of monopolization or cartelization that exists within the market of the privatized function.
Usually, decentralization entails explicit transfers of decision-making authority that are limited to specific programs and functions; consequently, the subordinate entities are not entitled to make independent decisions outside of their realms of decentralized authority. Decentralization also implies that the central or higher-level entity that decentralized authority can also unilaterally take back, or recentralize, that authority at any time.
One can also distinguish subjects of decentralization. In Democracy in America (1835), for example, Alexis de Tocqueville argued that modern democracies should be politically centralized but administratively decentralized. That is, authority to make all policy decisions should reside in the national government subject to majority rule, but the administration and implementation of policy should reside with regional and local governments. Similarly, while authority to mandate the provision of public services (e.g., education) and standards for those services might belong to the national or central government, authority for the actual production of those services (e.g., local schools) might be decentralized to regional or local governments.
Decentralization also might entail structural, functional, fiscal, and/or personnel matters. “Structural decentralization” refers to the authority of regional or local governments to establish their own form of government (e.g., home rule in U.S. states) or, in the case of field agencies, to structure their own operations. “Functional decentralization” refers to the authority of regional or local governments to make independent decisions about specific policy and service functions (e.g., fire, police, sanitation, and welfare). “Fiscal decentralization” involves the extent to which regional or local governments can independently (1) adopt and collect their own sources of revenue (e.g., levy sales, income, or property taxes), (2) set their own tax rules and rates, (3) borrow funds, and (4) expend their revenues on locally determined programs and projects. Decentralization with respect to personnel refers to the extent to which regional or local governments can independently decide such matters as public employment levels, employment rules, remuneration rates, employment conditions, fringe benefits, and collective bargaining.
Dennis A. Rondinelli, “Government Decentralization in Comparative Perspective: Theory and Practice in Developing Countries,” International Review of Administrative Sciences 47, no. 2 (June 1981): 133–45; U.S. Advisory Commission on Intergovernmental Relations, Measuring Local Discretionary Authority (Washington, DC: U.S. Government Printing Office, 1981), M131; and U.S. Advisory Commission on Intergovernmental Relations, State Laws Governing Local Government Structure and Administration (Washington, DC: U.S. Advisory Commission on Intergovernmental Relations, 1993), M186.
Last updated: 2006