Analysing the distributional impact of reforms: a practitioner’s guide to pension, health, labor market, public sector downsizing, taxation, decentralization and macroeconomic modeling

This document outlines three levels of analysis that offer a potentially tractable means of mapping out Poverty and Social Impact Analysis (PSIA) for decentralisation.

• the first level focues on the distribution of public resources across places
• the second level analyses the distribution of public resources across people, such as the poor and non-poor, given the prevailing institutional and governance arrangements within places.
• the third level highlights attempts to investigate impacts on local governance and public service delivery, that is, how effectively public resources are translated into public services
  

Examining the approaches that focus on identifying and assessing the short-term distributional impacts of decentralisation reforms, primarily through the channel of public expenditures, the author suggests that even the short-run evidence on decentralisation is quite fragmented.

The author points to two explanatory factors:

• that decentralisation projects are, by design and manner of implementation, quite diverse and difficult to compare
• that the methodologies for establishing the direction and magnitude of distributional impacts have been idiosyncratic.
  

The author says that whereas changes in the allocation of fiscal inputs across peoples and places may be fairly rapid, the impacts in terms of local governance and public service delivery are likely to be subject to more significant lags and may even be negative. Consequently, it may be necessary to determine the proper timing for the assessment of particular impacts.

The author concludes that agreement on a set of core decentralisation monitoring and evaluation indicators, including, for example, a poverty reduction strategy that brings together government, donors, and other key stakeholders, will be an important step in moving from short-run assessments to sustainable, ongoing assessments.

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