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Growth without GovernanceIt is well known that there is a strong positive correlation between per capita incomes and the quality of governance across countries. the authors propose an empirical strategy that allows separation of this correlation into (1) a strong positive causal effect running from better governance to higher per capita incomes, and, perhaps surprisingly at first, (2) a weak and even negative causal effect running in the opposite direction from per capita incomes to governance. The first result confirms existing evidence on the importance of good governance for economic development. The second result is new and suggests the absence of a "virtuous circle" in which higher incomes lead to further improvements in governance. This motivates the authors' choice of title, "Growth Without Governance." They document this evidence using a newly updated set of worldwide governance-indicators covering 175 countries for the period 2000-01, and use the results to interpret the relationship between incomes and governance focusing on the Latin America and Caribbean region-within a worldwide empirical context. Finally, the authors speculate about the potential importance of elite influence and state capture in accounting for the surprising negative effects of per capita incomes on governance, present some evidence on such capture in some Latin American countries, and suggest priorities for actions to improve governance when such pernicious elite influence shapes public policy.
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Sub-National Performance Incentives in the Intergovernmental FrameworkThis paper provides background for the
 Government of Indonesia as it considers if and how to
 introduce more robust local government performance
 incentives into the intergovernmental fiscal framework. The
 next section briefly examines the forces that have driven
 the recent national wave of interest in improving local
 government performance. This is followed by a review of the
 relatively limited set of local government performance
 incentives currently in force in Indonesia. The fourth
 section provides a conceptual overview of how to think about
 the possible expansion of local government incentive
 programs, outlining the potential role(s) of such programs
 in general and the key issues involved in designing and
 implementing them. The fifth section tentatively considers a
 number of options for additional local government incentives
 in Indonesia that the central government may wish to
 consider pursuing. The paper concludes with an outline of
 next steps for moving forward with the possible development
 of more purposeful and meaningful performance incentives in
 Indonesia's intergovernmental fiscal framework.
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Decentralization and Local Governance in MENA : A Survey of Policies, Institutions, and PracticesEntering the 21st century, the 1999-2000 World Development Report (WDR), identifies two main forces that are shaping the world in which development policy is being defined and implemented: (i) globalization, the increasing worldwide integration of private sector interaction and commercial relationships; and (ii) localization, a process of devolving fiscal and administrative roles and responsibilities from central to sub-national tiers of government. It goes on to note that these global-private and local-public pressures are not only reinforcing, but also challenging traditional paradigms and forms of intergovernmental systems. Political decentralization, often associated with pluralistic politics and representative government, aims to give citizens more say in public policy and decision-making. Its advocates assume that decisions made with greater participation will be better informed and more relevant to diverse interests in society than those made only by national political authorities. The concept implies that the selection of representatives from local electoral jurisdictions allows citizens to know better their political representatives and allows elected officials to know better the needs and desires of their constituents. Administrative decentralization aims to redistribute authority, responsibility and financial resources for providing public services among different levels of government. It typically takes three forms: de-concentration, delegation and devolution. Fiscal decentralization vests greater autonomy and authority with local governments in matters of fiscal importance, empowering local governments to generate their own revenues, through taxes and user charges, as well as determining their expenditure priorities based on a clear assignment of functions and responsibilities. Over the last two decades, it has been estimated that more than 100 countries, most of them in the developing world, have experimented with various forms of decentralization.