perspectivescientific
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Economists argue that fiscal decentralization must match a region's administrative capacity to avoid economic disaster. If a tiny local administration with limited staff is suddenly flooded with massive, volatile resource tax windfalls, they cannot absorb the capital. It leads to waste and corruption. Conversely, larger regions with robust institutions, like Indonesia's Bojonegoro regency, can manage these fluctuations. The economic success of decentralization depends entirely on scale and institutional maturity.
controversy
Supporting arguments
- Small administrations lack the capacity to absorb sudden revenue windfalls.
- Volatile resource prices destabilize local budgets without federal smoothing.
- Institutional maturity determines if resource wealth becomes a blessing or a curse.
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