Increasing the Effectiveness of Public Service Delivery
Interjurisdictional competition under fiscal decentralization may give local governments the incentive to lower their environmental policy standards or grant businesses with lucrative tax exemptions and favorable land deals so as to attract investment. Although these strategies seem sensible for individual jurisdiction, the aggregate effects of this type of competition are not always welfare enhancing. Clifford F. Zinnes proposes an innovative approach to shaping interjurisdictional competition in which all players know the rules and rewards of the game in advance to engender a “race-to-the-top” competitive environment. Zinnes calls it prospective interjurisdictional competition (PIJC).
In applying PIJC to organize intergovernmental fiscal relations under decentralization, a central government can be perceived as a donor that provides funds to local jurisdictions for specific reform purposes or provision of local services. To ensure efficiency, central authorities set goals and the corresponding tasks for achieving the targets. They also establish indicators for measuring outcomes, specify all monetary and in-kind rewards, and offer technical assistance. The final step is to design the tournament by identifying municipalities that are willing to participate and defining the time frame. In PIJC the central government does not dictate how each jurisdiction will achieve outcomes. Instead, calibrating the task selection, scoring method, and reward structure will become the major components of the central government’s grant project.
Unlike the contracting approach, the PIJC approach needs only a set of tournament instructions when policy goals and the related tasks are determined. The decision to participate in the tournament and how to achieve the preordained objectives will be left to each jurisdiction. It is assumed that autonomy and explicit rating systems and rewards would stimulate local initiatives to cooperate. Intensive project monitoring for compliance required in the conventional approach would be replaced by the scheduled publicity of participants’ performance throughout the tournament. In a situation in which scarce resources need to be allocated to best performers who are unknown to a central government or foreign donor, the PIJC promoted by a tournament would reward a limited number of contestants for achieving the best possible outcomes based on a set of predefined assignments.
This paper was presented at the Lincoln Institute’s annual Land Policy Conference in 2007 and is Chapter 14 of the book Fiscal Decentralization and Land Policies.