Fiscal illusion as an incentive for local government public expenditure efficiency: The influence of community sensitization

Paul Onyango-Delewa

doi:10.22437/ppd.v7i4.8564

Abstract

Although the effect of public expenditure efficiency on local government fiscal performance is widely-documented, what precisely explains expenditure efficiency remains largely unclear. Nevertheless, past research holds fiscal illusion as the most likely predictor and community sensitization very critical for fiscal illusion-expenditure efficiency formation. We employed fiscal illusion theory to investigate possible fiscal illusion-community sensitization-expenditure efficiency mediation in 16 districts, 6 municipalities, and 160 sub-counties of Uganda’s northern region. Over the years, Uganda; an East African country, is applauded for its fiscal federalism proficiency. But presently, its northern region is grappling a 20-year post-conflict trauma likely to compromise entity spending efficiency. Structural equation modeling results suggest that all the four fiscal illusion constructs: fiscal imbalances, political divide, tax payment bias, and fiscal sabotage, predict changes in expenditure efficiency. However, community sensitization does not mediate the fiscal illusion-expenditure efficiency linkages. Implications for these findings and possible direction for future research are discussed.

Highlights

Sub-national entities local governments are meant to provide public services of different kinds to their citizens
Sample Hypotheses proposed in this study were tested using 255 questionnaires administered in 16 districts, 6 municipalities, and 160 sub-counties located in the northern-post conflict region of Uganda
Possibly, this study is one of the very first efforts to address the issue of local entity public expenditure efficiency from a fiscal illusion theoretical perspective and in a post-conflict environment of Sub-Saharan Africa

Summary

Introduction

Sub-national entities local governments are meant to provide public services of different kinds to their citizens. In developing countries such as those of SubSaharan Africa, common public services at local level include: education, health, road networks, water and sanitation, and cultural and communal support (Afonso & Fernandes, 2008; Gupta & Marijn, 2001). Attaining that obligation effectively necessitates pre-determined, properly-managed, and constantly-monitored spending This is what is termed public expenditure efficiency by public administration-related theory, research and practice (Clemens & Miran, 2012; Gupta & Marijn, 2001). Much as resource-constraint, corruption, bureaucracy, tribal differences, and partisan politics are frequently cited by related studies (e.g. Afonso & Fernandes, 2008; Gupta & Marijn, 2001) as predictors of public expenditure efficiency especially in Africa, the position is not decisive enough

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Conclusion