College of Business and Economics

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Browsing College of Business and Economics by Author ".Tassew, Woldehanna (Dr.)"

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    The Impact of Fiscal Decentralization on Education and Health Outcomes in Ethiopia: A Regional Panel Data Analysis
    (A.A.U., 2010-06) Mesele, Weldemariam; .Tassew, Woldehanna (Dr.)
    Fiscal decentralization has formed an important component of recent institutional innovation, being widely adopted in both developing and developed countries. It has become a major policy initiative to achieve equity, efficiency, and accountability in the development efforts of many countries. But surprisingly, there is little agreement in the empirical literature in its effects on a number of outcomes. Accordingly, this paper aims to evaluate the effects of such kind of decentralization on basic education and health outcomes in Ethiopia, which undertook a massive decentralization of fiscal resources to regions in 1994/95 and to districts in 2002/03. We estimate the impact of this policy by employing a regional panel data set collected from nine regions and two administrative cities. The results suggest that although the decentralization has been characterized by some kind of vertical and horizontal fiscal imbalances, it has had a significant effect on increasing public primary gross enrollment and completion rates; and on the selected health outcomes too. The results are also robust to the way fiscal decentralization is measured. Moreover, fiscal decentralization has achieved a satisfactory equity in tenns of both equality of opportunity and inter-regional equity by reducing disparity in access to basic social services between previously underserved and better-off regions, suggesting that fiscal decentralization has been a pro-poor policy. Thus, the study urges policy makers and development agencies to close the existing fiscal gaps, possibly via fiscal equalization approach andlor relaxing some taxes to lower tiers of government, for better development outcomes at the grassroots level.