Effects of decentralisation on local public spending in Cameroon

This study investigates the effects of fiscal decentralisation on local public spending in Cameroon, using a panel dataset of 213 municipalities over the period 2010–2020. The research aims to assess how the transfer of fiscal and administrative responsibilities from the central government to local authorities influences both operational and investment expenditures at the municipal level. Methodologically, the analysis employs ordinary least squares (OLS), fixed effects, and system GMM estimators to address endogeneity and unobserved heterogeneity, with local public spending (including both operating and investment outlays) as the dependent variable and fiscal decentralisation—measured as the share of municipal expenditures in total expenditures—as the key independent variable. Control variables include local revenues, urbanisation, central government subsidies, conflict incidence, and mayoral tenure. Key findings indicate that fiscal decentralisation has a positive and statistically significant impact on both operational and investment spending, with a more pronounced effect on investment expenditures. The results underscore the importance of increasing central government transfers to municipalities to enhance local public investment. However, the study also highlights the negative impact of urbanisation and conflict on local public spending. The findings are robust across various model specifications and support the theoretical arguments of improved allocative efficiency and inter-jurisdictional competition under decentralised governance. The research suggests that further decentralisation, coupled with increased fiscal transfers and capacity-building for local governments, can improve the targeting and efficiency of public service delivery in Cameroon. Policymakers should consider these results when designing reforms to strengthen local governance and public finance management.