Fiscal Decentralization and Regional Public Service Performance: Evidence from Emerging Economies

Abstract

Fiscal decentralization has been widely adopted in developing countries as a governance strategy to improve the efficiency and responsiveness of local public service delivery. By transferring fiscal authority and expenditure responsibilities from central to local governments, decentralization is expected to enhance resource allocation, accountability, and service quality. However, evidence regarding its effectiveness remains mixed. This study examines the relationship between fiscal decentralization and local public service performance through a systematic literature review of 20 scholarly documents retrieved from Google Scholar. The findings indicate that fiscal decentralization generally contributes positively to improvements in education, healthcare, infrastructure, and administrative services by enabling local governments to allocate resources more effectively and respond better to community needs. The review also highlights positive effects on citizen participation, transparency, and local government accountability. Nevertheless, the success of decentralization depends largely on institutional quality, administrative capacity, governance effectiveness, and fiscal equalization mechanisms. Weak institutions and disparities in local fiscal capacity may limit the benefits of decentralization and create unequal service outcomes. The study concludes that fiscal decentralization can enhance local public service performance when supported by strong governance structures, transparent fiscal management, and adequate local government capacity.