Abstract:
This study aims to examine how fiscal decentralization affects the effectiveness of public service delivery in Homabay County. It uses a stochastic
frontier method to estimate time-varying efficiency coefficients and investigates the effects of fiscal decentralization on those efficiency
coefficients. The results show that, in some cases, fiscal decentralization can increase the effectiveness of public service delivery. Initially, the
decentralization process needs appropriate political and institutional conditions or goodwill. Second, it would seem that good outcomes call for a
high enough degree of expenditure decentralization. Third, there must be sufficient decentralization of both revenue and expenditure. Lastly, fiscal
decentralization could make public service delivery less effective if these conditions are not met. The paper recommends the need for developing
countries to adopt fiscal decentralization because it helps subnational governments raise revenues through enhancing tax administration and
collection by the government as well as taxpayer compliance. It also supports legislation and policy changes that give subnational governments
more fiscal authority.
