Intergovernmental Fiscal Relations: Questions of Accountability and Autonomy - Governing the Nexus: Water, Soil and Waste Resources Considering Global Change - page 71

responsibilities and coordination problems. Additionally, subnational governments
must have the financial resources to perform the functions assigned to them. For

sound fiscal policy, subnational governments must have discretionary power over

their own revenues, but tax sharing among different layers of government is also
fundamental. The challenge is to achieve the correct balance between the two.
Dinar et al. ( 2007 ) argue that decentralization in water resource management
positively depends on the local share and discretion over central government
funding and on the share of users paying tariffs. Mechanisms that improve local
transparency and accountability are also essential ingredients to reduce misuse of
public resources and, therefore, for the success of decentralization. According to
Gon ç alves ( 2014 ), participatory budgeting practices increase citizens ' awareness on

local public cials to citizens, and

improves the living conditions of the poor namely in the areas of health and
sanitation.
As stressed by Weingast ( 2014 ), political economy aspects also in

finance issues, fosters accountability of local of

uence the
outcome of decentralization. Even with a well-designed federal system, the exis-
tence of a predatory central government will lead to the malfunctioning of decen-
tralization. The central government may use decentralization to consolidate its
party

'

is interests rather than to improve service delivery. This problem is particularly
acute in the developing world. The existence of corrupt and self-interested local
politicians is also a negative factor. If local officials are able to capture the new
powers assigned to subnational governments to extract rents, the quality of service
delivery may actually decrease (Bardhan and Mookherjee 2000 ). At the local level,
it is also crucial that subnational governments have the required competencies to
perform the new functions attributed to them by decentralization measures and that
residents engage in

finding solutions to local public problems, participate in local
decision-making and hold subnational governments accountable. The success of
decentralization measures in water supply, sanitation and irrigation is positively
related to users involvement in management. As pointed out by Kurian and Ar-

dakanian ( 2014 ), the development of capabilities and knowledge of public of

'

cials
is fundamental for the success of the introduction of technological changes to
address environmental challenges, and for the sustainable and integrated manage-
ment of water, soil and waste resources.
However, decentralization may also in

uence governance. Regarding the size of
government, there are two theoretical dissenting views. Brennan and Buchanan
( 1980 ) argue that decentralization reduces the government

s dimension in the
economy as it increases tax competition among public authorities in the context of
geographic mobility of taxpayers. On the other hand, Oates ( 1985 ) points out that
decentralization may lead to larger governments due to losses in economies of
scale, poor quality of local of

'

cials and soft budget constraints. Empirical evidence
on this issue is mixed, although when measured by the number of employees most
studies conclude that decentralization increases the size of government. 12

12

For a cross-country analysis, see Martinez-Vazquez and Yao ( 2009 ).