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Regional Inequalities,
Decentralisation and the
Performance of LocalGovernments in Post-Communist
RomaniaDrago Dragoman
a
aDepartment of Political Science, Lucian Blaga
University of Sibiu, Romania
Available online: 21 Nov 2011
To cite this article: Drago Dragoman (2011): Regional Inequalities, Decentralisation
and the Performance of Local Governments in Post-Communist Romania, Local
Government Studies, 37:6, 647-669
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Regional Inequalities,Decentralisation and the Performanceof Local Governments inPost-Communist Romania
DRAGOS DRAGOMANDepartment of Political Science, Lucian Blaga University of Sibiu, Romania
ABSTRACT The economic growth that has occurred in post-communist Romania has polarised society and greatly increased existing inequalities. The aim of this paper isto investigate regional disparities, to underline the role of governmental mechanismsin smoothing out territorial inequalities, and to examine the possible effects ofregional economic disparities on the performance of regional administrations in
delivering public services, in the light of the new regionalisation debate. Theconclusion is that Romanian counties institutional performance does not completelycorrelate with regional wealth; but regional disparities and the mechanisms used tosmooth out inequalities have to be taken into account in the public debate concerning
further decentralisation.
KEY WORDS: Regional inequalities, decentralisation, post-communist Romania
Introduction
Todays Romania is one of the poorest European Union member states.
This poverty is associated with a high degree of social inequality. Economic
growth during post-communism might in fact be responsible for increasing
inequalities. This is not only about inequalities in terms of income, but also
about gaps regarding education, gaps between urban and rural residential
areas, and about ethnic Romanians relating to minorities, especially ethnic
Roma. Finally, inequalities may be mapped geographically.
Bridging regional gaps is one of the main European policies, and
Romania could now become a target for this specific European economic
Correspondence Address: Dragos Dragoman, Lucian Blaga University of Sibiu, Department of
Political Science, 34 Calea Dumbravii, 550324 Sibiu, Romania.
E-mail: [email protected]
Local Government Studies
Vol. 37, No. 6, 647669, December 2011
ISSN 0300-3930 Print/1743-9388 Online 2011 Taylor & Francis
http://dx.doi.org/10.1080/03003930.2011.623010
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policy. One would expect that ongoing economic growth would have had a
strong effect on existing regional inequalities. However, the Romanian
government has been unwilling to take any risks in redesigning regional
administrative entities, fearing in part a worsening of inequalities. So it isessential to map regional economic and social disparities today, when
Romania is a full member state of the European Union, and to discuss one
of the consequences of these, namely inequalities in institutional perfor-
mance. Do the rich counties perform better in delivering public services?
This is an important issue when it comes to assessing a future regional
design aimed at the political goals of equity and equality.
The article will thus focus first on the existing regional design. Then it will
briefly review the main findings concerning regional disparities and
mechanisms for smoothing out inequalities in Romania. Finally, it willdiscuss a very important issue related to inequality: institutional perfor-
mance at county level in three administrative domains. The conclusion is
that regional inequalities do not currently affect institutional performance;
yet decision makers in Romania have to consider the potential threat of
increasing regional disparities.
Few analyses in Romania have so far focused on the economic and
administrative issues of regionalisation. Whilst many views in the
regionalisation debate have brought forward cultural and political argu-
ments, I think the debate has failed to note an important goal in governing,which is solidarity and equity. These aspects, essential in building a
political community, are often largely neglected by comparison with
other principles, particularly regional cultural identity, administrative
centralisation, nation building and European integration. I also hope this
research will have a practical purpose when consideration is given to putting
further regionalisation and solidarity mechanisms in place in Romania.
Regional administration in Romania
According to its constitution, since 1991, Romania has been a unitary state.
Yet the same constitution acknowledges the existence of administrative sub-
units, which consist of 41 counties (judete) and Bucharest, the capital city.
Organising Romanian territory was never free of ideological purposes. Like
Italy and Poland, for instance, the modern Romania created in 1918
integrated territories that had previously belonged to multinational
empires those of Austria-Hungary and Russia. Even before that, the
Romanian state created in 1859 bound together two provinces inhabited by
Romanians: Wallachia and Moldova. In 1878, the province of Dobruja was
added to the national territory following the Russo-Turkish War of 18771878 and the Peace Congress of Berlin (Hitchins 1994). The integration of
new provinces into Greater Romania in 1918 then brought in large ethnic
and religious minorities. Thus, organising the political space was a serious
matter for the Romanian elites, who aimed to consolidate the new national
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state and unify the national culture (Livezeanu 1995). The territory was then
divided in 71 counties, which lasted until 1948, when the communists first
reformatted the territorial administration into districts and oblasts, having
in mind a soviet type of organisation. Under this type of administrativeorganisation, the Hungarian minority in Transylvania enjoyed a certain
degree of autonomy. However, the 1968 communist reform of administra-
tion in Romania eliminated such autonomy and tried to homogenise the
territory according to nationalistic aims (Chen 2003, p. 184). This
administrative organisation settled the county as the territorial unit. This
arrangement survived into the post-communist period, and nowadays
Romania is organised into 41 counties and Bucharest at the NUTS III
level.1
When it came to sorting out the administrative sub-units, the only legalentities accepted by the constitution and by the Law on Local Public
Administration in 1991 were counties. Although modern Romania was born
by binding together different provinces, such historical entities as provinces
remained only as cultural denominations. Ethnic nationalism was a key
weapon in public discourse at the time, a strategy adopted by post-
communist parties in consolidating power (Linz and Stepan 1996). Thus
debating regional design was characterised as anti-constitutional behaviour
and was banned from the public discourse for several years.
It soon became obvious that Romania had to harmonise with EuropeanUnion structures and had to face the challenges of regional development
Figure 1. Counties in Romania, with county capital cities marked by dots.
Regional Inequalities in Romania 649
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policies, as other East European countries have done (Vintar 1999). The
Romanian authorities then accepted the need to shift from county-level to
regional-level policies; but the new approach was more of a tool for
development than regionalisation in terms of restructuring the regional
Figure 2. Romania counties (statistical regions NUTS III).
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administration (Coman et al. 2001, p. 358). This shift was proposed by the
Green Paper for Regional Policy in Romania, published in 1997 by
the Romanian government with the support of the European Commission.
The Romanian Parliament then adopted Law 151/1998 on Regional
Figure 3. Romania development regions (statistical regions NUTS II).
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Development as set out in the Green Paper, and Romania was divided in
development regions at NUTS II level.2
The Green Paper assessed the division of the national territory into eight
development regions, each grouping several existing counties and designatedaccording to functional criteria (Sandu 1999, p. 133). These criteria were
founded on the potential for cooperation between counties and the variation
in development indices. A subsequent study (Hansen et al. 1997) assessed
that another criterion, namely heterogeneity, was of some importance. If
each region contained both developed and disadvantaged areas, friction
between central government and the regions over fund allocation would be
much easier to master than in the case of great development differences
between regions. On the other hand, such developed and disadvantaged
areas have complementary potential for development. In fact, each region isdesigned to have central and peripheral sub-regions. Whereas central sub-
regions are characterised by higher levels of human capital, peripheral sub-
regions have negative values on the index of human development, meaning
by that their levels are below the national average (Hansen et al. 1997). Thus
each peripheral sub-region might be considered as a priority area and a
target for development actions.
As outlined earlier, the new macro-regions were designed only as a
development tool, and because they were not territorial-administrative
units settled by the constitution, they were not legal entities, but onlyformal associations between counties. They were ruled by regional
agencies and a specialised ministry for regional development. According
to Dobre (2005), Romania reformed its regional policy in order to comply
with the European NUTS system and to prepare itself for receiving the
EU structural funds. This represents a clear government strategy of
creating functional regional structures for administrative and statistical
purposes, without devolving real competences to the newly created
regional entities.
From 2004 on, in accordance with Law 315/2004, which replaced Law
151/1998, the macro-regions have been coordinated by regional develop-
ment councils. As underlined earlier, these are not legal entities and only
coordinate the various regional programmes that are effectively run by
regional development agencies. These agencies are non-profit, non-govern-
mental and legal entities that project, implement and overview development
policies at regional level. The financing of regional policies is the result of a
special fund, the Regional Development Fund, which is built on the
financial contributions of the Romanian government, counties, private
entities, banks, foreign investors, the EU and other international institu-
tions.3 The general regional development policy at national level is run bythe European Integration Ministry, in cooperation with the National
Council for Regional Development. Half of the councils members are the
presidents and vice-presidents of regional development councils, while half
of them are national government representatives. The councils main
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functions are to overview the national policy for regional development,
decide on the priorities of the Regional Development Fund, and supervise
and monitor the financing of the projects proposed by the regional
development agencies that are accepted by regional development councils.Concluding our brief analysis of the regional structures, we might say that
the regional councils play a rather deliberative function and the regional
agencies a rather executive function; yet the general policy and financing
continue to be run in a centralised manner by the national government,
through the National Council for Regional Development and the Regional
Development Fund. A further administrative and fiscal decentralisation
would provide the macro-regions with the necessary tools to effectively
promote regional autonomy and development.
Development regions situated on Romanias borders can be part of widercross-border cooperation structures, e.g. the Euro-regions (Popescu 2008).
Romanian border regions are part of 11 such Euro-regions, or other trans-
border regions, with corresponding regions from Hungary, Serbia, Ukraine,
Moldova and Bulgaria. Region 5 (West), for example, is part of the wider
Danube-Cris-Mures-Tisa Euro-region and cooperates with the Hungarian
South-East Region and Voivodine province in Serbia. The cooperation may
be multilateral, but bilateral projects are put in place, like the Euro-Inno-
Regio Project that aims to set the cooperation priorities in the areas of
energy and environment between Romanian Region 5 and the HungarianSouth-East Region. Cross-border cooperation is largely backed by the
European Commission, which in 2003 initiated a consultation of EU
member and candidate states regarding regional forecasting in order to
strengthen the cooperation between regional actors. Unfortunately,
according to Popa (2003), Romanian border cooperation is still marked
by serious difficulties, such as different administrative levels from those of its
partners, different degrees of decentralisation of regions, economic
disparities, lack of financial support and low economic trade. This is the
same for cross-border cooperation between Romania and Bulgaria. Despite
a common transition from authoritarian rule and socialist economy, the
bilateral cross-border cooperation tends to be local and generated by the
willingness of the mayors on the two sides of the river. The cooperation is
mainly oriented towards four areas: improving infrastructure; economic
development; environment protection; and people-to-people small scale
actions like cultural exchanges, linguistic education, sports or local
democracy. Euro-Dobruja is one of such cross-border cooperation.
Financed by the EU through its Phare Programme, it aims to stimulate
the setting up and development of cross-border cooperation relationships
contributing to economic growth in the Constanta (Romania) and Dobrich(Bulgaria) regions.4 European Phare funds for Romania are also available
for a special cross-border cooperation (CBC) relationship with Hungary,
while cooperation with Ukraine, Moldova and Serbia benefits from special
funding from the European Regional Development Fund.
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Counties, and not regions, are the administrative units fixed on by the
Romanian constitution. They generally enclose a number of towns and
villages, and a large city in each county (represented by dots on the map in
Figure 1) is designated the capital city. Counties are run by localgovernments called county councils. They are responsible for coordinating
commune and town councils in the performance of those public services that
are of countywide interest. They deal with economic development activities
and establish the general orientation of spatial planning, environmental
policies and county fees and taxes (Coman et al. 2001, p. 371). These county
councils embody the legislative power at county level. County councillors
are elected in various numbers, depending on the population of the county.
The county council, as legislative body, rests on an executive apparatus, the
administration, run by the president of the county council. The president isresponsible for the functioning of the county administration and represents
the county in its relations with various natural or legal entities. The
relationship between the decision-making level and the executive level could
be described as follows (Coman et al. 2001, p. 376).
The financing of the counties budgets is multifold. In addition to
property taxes, new sources of revenue were introduced by Law no. 189/
1998 on Local Public Finance, which established the basis for financial
autonomy of local governments. The pre-1998 financial system was based
almost entirely on state budget transfer payments, which made things verydifficult for local governments financial management. Todays local budgets
encompass taxes, duties, other fiscal revenues, non-fiscal revenues, capital
revenues, special deviation of revenues, grants from the state budget, shares
of revenues payable to the state budget and transfers for special purposes.
Since 1999, local governments may use a share of personal income tax
Figure 4. County administration structure in Romania.
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collected from residents in municipalities and counties. Slowly, central
government has accepted that revenues should be transferred to local
governments in order to support them in their growing responsibilities. In
this respect, Romania is not a unique case in the region (Hermann et al.1997, Kimball 1998, Csanda 2000, Nikolov 2006, Pe teri 2006). In Romania,
these funds particularly include transfers from value added tax collected
locally that were previously passed straight to the central government. They
now represent the bulk of the sources of revenue for local and county
governments.
The regionalisation debate in Romania
Many Western European countries experienced decentralisation and evenregionalisation in order to benefit from economic growth opportunities that
occurred after the Second World War. Even generally centralised states, like
Italy and Great Britain, accepted further regionalisation (Putnam 1993,
Harrison 2006). This served as a model for the Romanian proponents of
regionalisation, who were a handful of Romanian and Hungarian
intellectuals from Transylvania, historically one of the wealthiest regions
in Romania. Back in 2000, these people triggered a debate about a new
territorial design and the political relationship between the centre and the
periphery. Their main arguments are not economic, but political andcultural. First, the existing local political organisation and centralisation
come from an ethnic Romanian definition of the state (Weber 2000), which
is strengthened by the RomanianHungarian conflict in Transylvania.
Fearing the Hungarian threat to Romanian statehood, Romanian
nationalists and centralists always invoke the so-called conflict as the
perfect argument for centralisation. However, the key to building up a
peaceful and prosperous Transylvania, according to these intellectuals,
would be a trans-ethnic party, drawn from the political elites of Romanian
and Hungarian ethnic groups and motivated by a kind of civic regionalism
(Molna r 2000a). Second, Transylvania would be accepted as a Romanian
province that largely differed from the rest of the country in terms of
historical cultural heritage, ethnic composition and even electoral behaviour
(Molna r 2000b).
These intellectuals proposals were put together in December 2001 in a
Memorandum to the Parliament Regarding the Regional Structuring of
Romania.5 They have also been submitted to the leadership of political
parties in parliament, the European Parliament and the EU Committee for
the Regions. They propose the harmonious development of Romania,
considering the historical, economical and socio-cultural identity of itsregions. According to them, a centralised administrative system in Romania
largely favours corruption and bureaucracy and amplifies the inherent
deficiencies of the administration, which is based on numerous and very
costly small territorial units. Therefore, they want an administrative reform
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that will redefine the status of the existing territorial entities and introduce
new administrative and political forms, starting either from the development
regions or from the historical provinces, with regional councils or provincial
parliaments headquartered in region or province capitals. Any structuraldecision has to be the result of a referendum organised at regional or
national level, as appropriate, following a large-scale public debate, in order
to allow the population to make an informed choice.
With their emphasis on political and cultural arguments, one hardly finds
in the approach of the proponents of regionalism any reference to the
economic issue of regionalisation. These people pay no attention to issues
such as equity and solidarity mechanisms for local development and
governance, the way public financing affects governance capacity, and what
would happen in the poor, unsustainable counties and regions of Romaniaafter regionalisation. Do rich counties today perform better than poor ones?
Do they deliver better public services? And what are the financial solidarity
mechanisms available to help poor counties to cope with the administrative
duties that are their responsibility?
Regional inequalities and solidarity mechanisms in Romania
Solidarity is one of the principles of the European Union. According to the
Berlin Declaration of March 2007, on the occasion of the fiftieth anniversaryof the signature of the Treaties of Rome, there are many goals we cannot
achieve on our own, but only in concert. Tasks are shared between the
European Union, the Member States and their regions and local
authorities. The Fourth Cohesion Report, issued in May 2007 by the
European Commission, acknowledges that European programmes under-
taken in the 20002006 period have contributed to greater cohesion.
Cohesion policy has boosted GDP, created employment, improved the
competitiveness of EU regions and reduced regional disparities in economic
development (European Commission 2007, p. 2008).
But the enlargement of the European Union to 27 member states
increased disparities among the different geographical areas of the union,
and even within the new member states. The new member states experienced
deep economic change, accompanied by increasing social polarisation.
Before European integration, GDP slumped, industrial employment
dropped, and many regions were confronted by the cost of restructuring.
According to Lintz, Mu ller and Schmude (2007), many cities and regions,
especially single-industry regions and regions situated in the more peripheral
parts, away from the capital cities, have experienced much less economic
renewal than capital city regions like Prague, Bratislava, Budapest andWarsaw. Determining factors such as location, inherited economic structure
and environmental quality make them less attractive for investments,
making it more difficult for these regions to improve their competitive
standard. This vicious circle generally makes them stagnate and even
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decline. Unfortunately, new member states are not yet fully capable of
identifying and pursuing strategic development. They still lack coherent
government regional policy and do not fully benefit from the European
structural funds (Grzegorz Grosse 2006; Weltrowska 2002). The restructur-ing and development costs largely exceed the economic capacities of new EU
member states. Therefore, for the moment, regions in Central and Eastern
Europe have to be supported in their restructuring effort through
decentralisation of policy-making capacities and by national and European
assistance, in order to reduce the increasing polarisation between growing
and stagnating (even declining) areas that can be seen in Romania and
elsewhere.
Although the county councils in Romania all benefit from the same
administrative powers, they do not face the same administrative reality.Regional development in Romania is uneven and this seems to be due partly
to old or more recent historical legacies. Modern Romania has integrated
provinces previously run by multinational empires. Provinces like Transyl-
vania and Bukovina, part of the Austro-Hungarian Empire, were wealthier,
and more urbanised and industrialised, than the Kingdom of Romania,
which was dominated for centuries by the Ottoman Empire. After the
Second World War, the communist regime wanted to transform the
agriculture-based economy into a leading industrial economy, and invested
for this purpose in less developed areas, having in mind the bridging of theindustrialisation gaps that favoured Transylvanian towns before 1918. A
new, artificial urbanism was born from this artificial industrialisation, which
tended to suppress traditional Romanian villages (Chen 2003). It finally
proved to be a heavy social burden in the aftermath of post-communism,
when hundreds of plants and factories collapsed in the recently created
mono-industrial towns. As a result, many people experienced changes in
their social and professional status, including marginalisation and exclusion.
The post-communism period has been one of development and reshaping
of the economy. After an initial fall in almost every macro-economic
indicator, from 2000 on, Romania has witnessed an economic recovery, and
since 2005 this has become a real takeoff, following the 2005 fiscal reform
that instituted a 16 per cent flat tax on revenues. However, economic
development is uneven. The United Nations Development Programme
(UNDP) in Romania has issued several reports on this topic. The 20032005
National Human Development (NHD) Report underlines the progress that
has been made and the threats to this that have occurred. It stresses the fact
that, despite rates of economic growth and economic performance in
Romania, there are still troubling signs in its overall human development
profile. According to UNDP, the current human development profile ofRomania confirms three chain reactions in the economic growthhuman
development cycle. First, the dynamic and improved economic performance
of past years has not yet activated faster and more equitable human
development progress. Second, the slow progress on human development
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has not been sufficient to expand economic activity, much less income. And
third, economic growth has not been even across and within regions. The
third and last point is particularly interesting for our study. From a first
look at the eight development regions that were formalised in 1997, we caneasily see the large territorial disparities. This map of regional inequalities is
shown only as an example, since our study is a county-level analysis.
Because regions in Romania are only territorial and not administrative, they
cannot be taken into account. Otherwise, they would clearly show ongoing
disparities in Romania (EU Fourth Report on Economic and Social
Cohesion, pp. 190191).
By using economic and human indicators, the NHD Report (2005, p. 71)
maps four kinds of regions/counties in Romania. First, some regions seem
to have better opportunities for expanding economic and human develop-ment. These regions are Region 7 (Centre) and Region 5 (West), forming the
historical province of Transylvania, and Region 8, Bucharest, the capital
city of Romania. These regions are characterised by large and urban
localities, with dynamic economic conditions and diverse production
structures. They have low unemployment rates and more autonomy to
generate their own resources. Second, some regions have great potential,
despite having shown limited growth. These are Region 4 (North-West) and
Region 2 (South-East), generally large urban counties where economic
growth has occurred, but on a smaller scale and at slower rates. Theseregions are average in terms of unemployment rates and other development
indicators. Third, Region 3 (South) is characterised by greater and diverse
disparities, growing or unstable unemployment rates, low productivity,
decreasing levels of life expectancy and lower educational achievement. And
fourth, Region 4 (South-West) and especially Region 1 (North-East), show
less stability and potential than the rest. Thus they are defined by the NHD
Report as regions with contracting opportunities and little growth. They
generally have higher levels of unemployment, low human development
indicators and widening disparities in the area of educational attainment.
The same NHD Report underlines the existence of mechanisms aimed at
coping with regional disparities. In fact, reducing inequalities has always
been a priority for central government, but it became a vital issue after the
fall of communism (Ramboll 1996). One of the financial equalisation
mechanisms is the equalisation fund, which is at the disposal of each county
in Romania and is funded by personal income tax proceeds. In 2003, for
example, 17 per cent of the share of personal income tax was at the disposal
of counties for equalisation, compared with 10 per cent at the disposal of
counties for their own spending and 36 per cent at the disposal of
municipalities. The aim of these equalisation funds is to smooth out theinequalities in resources between counties and between local communities
within counties. These funds are distributed by central government to
counties by taking into account their fiscal capacity to collect personal income
tax. However, as emphasised in the NHD Report (2005, p. 46), an unintended
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Table1.
RegionalindicatorsforRomania
Developmentregions
Population
(1,0
00inh.),
2004
GDP
perhead
ineuro,
2004
GDPperhead
inPPS(index,
EU-27
100),
2004
Unemployment
rate(%),2005
High
educational
attainmentof
personsaged
2564
(%
total),
2005
%
ofthe
population
aged
65,
2004
Romania
21,6
73
2,9
32.8
14.7
7.2
11.1
14.4
Region1,
North
-East
3,7
37
2,0
29.3
11.6
5.7
9.4
14.0
Region2,
South
-East
2,8
51
2,6
61.3
14.1
7.9
8.5
14.0
Region3,
South
3,3
42
2,4
47.0
13.2
9.2
7.9
16.2
Region4,
South
-West
2,3
18
2,4
43.9
13.0
6.6
10.6
15.9
Region5,
West
1,9
38
3,3
63.7
15.2
6.7
10.9
14.1
Region6,
North
-West
2,7
41
2,8
50.7
13.3
5.9
9.1
13.4
Region7,
Cente
r
2,5
37
3,0
56.9
14.7
8.4
9.7
13.4
Region8,
Bucharest
2,2
08
5,6
16.7
23.9
6.9
25.4
14.4
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consequence of the so-called equalisation fund policy is that it has lead to
growing inequalities, both between and within counties, because it hasincreased the variations in per capita resources of local governments, and
inequalities in resources among local governments are larger than the GDP
per capita differentials. Despite this unintended effect of a particular
equalisation policy, the willingness to smooth out inequalities is clear.
Another example can be found in the local funding for road development.
Although central government collects road taxes through the Special Fund
for Roads, almost one-third of the proceeds are distributed to county
councils and, exceptionally, directly to local communities. The principles of
distributing these funds are, theoretically, the length of the road network, itstechnical status and the level of traffic. However, following the NHD Report
(2005, p. 47) it was noted that the distribution of funds did not correlate to
either the size of the population or the level of economic development.
Despite allegations of political discretion, we shall see below that a certain
equity effect was nevertheless produced by this kind of policy.
Institutional performance at county level
Explaining institutional performance is of vital interest for both scholars
and public authorities. As underlined by Putnam (1993) in his seminal work,
performance is by no means exclusively related to modernisation and
economic development, as one might expect, but to cultural factors as well.
For example, the level of social capital proves to be the most reliable
predictor of the institutional performance of Italys regional public
authorities. Following Putnam, numbers of scholars have checked this bold
claim. Whiteley (1997) emphasises that the impact of social capital on
growth is comparable with the impact of human capital and education.
Knack and Keefer (1997) clearly show that social trust influences the growth
rates of countries included in World Values Surveys. When generalised tothe European regions, Putnams model is ambivalent. Whereas for some
scholars (Tabellini 2005, Beugelsdijk and van Schaik 2005) the model in
convincing, for other scholars it is much less so. According to Schneider
et al. (2000), although they rely as closely as possible on Putnams
Table 2. The county composition of development regions
Regions Counties
Region 1, North-East Bac
au, Botosani, Neamt, Iasi, Suceava, VasluiRegion 2, South-East Braila, Buzau, Constanta, Galati, Tulcea, VranceaRegion 3, South Arges, Calarasi, Dambovita, Giurgiu, Ialomita, Prahova, TeleormanRegion 4, South-West Dolj, Gorj, Mehedinti, Olt, ValceaRegion 5, West Arad, Caras-Severin, Hunedoara, TimisRegion 6, North-West Bihor, Bistrita-Nasaud, Cluj, Maramures, Satu-Mare, SalajRegion 7, Centre Alba, Brasov, Covasna, Harghita, Mures, SibiuRegion 8, Bucharest Bucharest
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definitions and research design, their statistical analysis suggests that the
effect of social capital on economic growth at regional level in Europe is
ambiguous. Economic rather than cultural factors are more likely to be the
most forceful determinants of growth of the regions in Europe. Putnamsbold claim was even tested in the setting of other countries, in Germany for
example, but the conclusions are mixed. Trust and density of civic
associations correlate positively with regional economic growth (Panebianco
2003). But for Blume and Sack (2008) the impact of social capital on
economic development is split. Only trust and preferences for markets have
a positive effect, while corporatist political networks show a negative effect.
Because of lack of data, we do not intend here to measure the importance
of social capital for institutional performance and economic development in
Romania. We intend only to assess the extent to which developmentdisparities are related to governance capacity, in order to check on the
relationship between the performance of Romanian county councils and the
wealth of counties. In fact, we expect to find a positive and significant
correlation at county level in Romania, which may serve as a warning about
further decentralisation and future solidarity mechanisms, with significant
social and economic implications. After presenting the methodology, we will
focus on the discussed relationship.
Data and methodology
Since the regions in Romania are not administrative units, we have to turn
to the counties in order to analyse regional disparities and performance. We
measure the governance capacity at county level by using the data collected
by the Institute for Public Policy Romania in December 2005 and January
2006.6 The data collected relates to three domains of competence for the
Romanian counties, namely county roads and bridges management, child
protection and public library services, as shown in Table 3. These specific
areas of competence are the most important areas of activity for county
councils in Romania at this stage of decentralisation. For this reason we use
these precise data when computing the institutional performance of county
councils. Road infrastructure is still a problem in Romania. Whereas there
are a few kilometres of brand new highway build after 1989, the number of
cars has risen dramatically. The increase in traffic is not confined to
motorways, but can be seen on every local and county road. A special Fund
for Roads was constituted on the basis of a special tax, and almost one-third
of the proceeds were distributed to county councils.
The child protection system was one of the most controversial issues
during negotiations over the Romanian accession to the European Union(Roth-Szamoskozi 1999) especially in 2003 and 2004, the years preceding
the signing of the European accession treaty in 2005. At the time of the
negotiations, Romania had been confronted since 1989 with two major
problems: the legacy from the communist regime, which had placed many
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children in placement care institutions; and the difficulties of transition to a
market economy. The European demands for Romania were to close many
of the large institutions for abandoned children and to focus on vulnerable
children. Sets of community-based care institutions were created and thereintegration of children into the natural family was favoured over financing
placement centres. The bulk of these new child protection services were
created at county level and were the counties responsibility. Finally, the
management of county libraries is the last domain of competence taken into
account. Every county manages a county public library, which is not
exclusively used by the inhabitants of the county capital city, but by people
from the whole county. The purpose of these libraries is to boost reading in
Romania. The results of a Cultural Consumption Barometer in November
2005 exposed the low level of reading and the extent of public needs.7
According to this survey, the cultural infrastructure people want the most is
libraries and, where such libraries already exist, most people agree they are
very useful. At the same time, the same survey unravels great regional
disparities in cultural public infrastructure, with Region 7 (Centre) and
Region 8 Bucharest on the top of the scale and Region 1 (North-East) at the
bottom.
These data enable us to build up composite indices of performance for
two consecutive years, 2003 and 2004, for each of the three domains of
competence. Road management performance is measured by an index thatis a mean scale of 11 activities. Before the index was computed, the
individual measures of the activities were standardised. That is the same for
child protection performance (mean scale of seven specific activities) and for
public library performance (mean scale of nine specific activities). All the
domains of competence and their related specific activities are presented in
Table 3. The reliability of each individual index of performance was checked
in order to ensure that the indices were robust. On the basis of the three
indices, a general index of institutional performance for 2003 and 2004 was
built up, computed as a mean of standardised indices of performance for the
three competency domains.
Economic resources, institutional performance and equity
Central government in Romania has entrusted county councils with growing
responsibilities. One might expect that domain-specific competence and
overall performance would be related to the financial capability of the
counties. Because an important share of the personal income tax and value
added tax collected locally form the bulk of the counties budgets, it is
reasonable to expect that the richest counties will be the most effective inmanaging their competence domains. Looking at Table 1, we expect to find
the counties composing Region 5 and Region 7 at the top of the
performance scale and the counties composing Region 1 and Region 4 at
the bottom of the scale. But this is not the case: counties from wealthy
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regions are situated at mid-scale (Brasov, Arad) and even at lower-middle
scale (Sibiu, Timis), while counties from poorer regions are at the top of the
performance scale (Valcea, Dambovita, Teleorman). Surprisingly enough,
the highest performing county for 2003 is Botosani, from Region 1, one of
the poorest counties in Romania, and for 2004 it is Dambovita, from
Region 3.We now measure the relationship between institutional performance and
the wealth of counties. There are no significant and positive correlations
between the governing capacity and two measures of wealth of counties, the
gross domestic product per capita and the mean monthly salary, both
Table 3. Indices of institutional performance at county level in Romania
Domain/item
A Road management1 The county council has elaborated a strategy in order to modernise county roads andbridges
2 Proportion of modernised roads in the overall road network3 Proportion of dirt roads in the overall road network4 Proportion of expired road in the overall road network5 The county council has elaborated a bridge classification regarding the risk categories6 Mean duration between two modernisation interventions on the same road span7 Mean duration of maintenance work on county roads8 Mean duration of modernisation work on county roads9 External funds drawn by county council for roads and bridges10 Proportion of investment funds from the overall spending funds on county roads and
bridges
11 Spending for qualifying, perfecting and training specialised personnel in roads andbridges department
B Child protection1 The county council has elaborated a strategy for child protection2 External funds drawn by county council for child protection area3 Proportion of specialised personnel from the entire personnel working in child
protection area4 Proportion of children placed in extended family (relatives until the fourth grade) from
the whole number of children placed in families5 Number of children included in the protection system that changed the maternal
assistant twice a year
6 Number of pregnant young girls (aged of 1216 years) included in the child protectionsystem7 Number of children from the child protection system in police records for anti-social acts
C County libraries1 Proportion of readers from outside county capital city from the overall active readers2 County library does have a webpage3 County library does use an instrument for measuring readers satisfaction4 County library does open during weekends5 External funds drawn by county council for public library6 Number of book transactions vs. number of active readers7 Proportion of spending for books and publications from the overall library spending8 Spending for qualify, perfection and train specialised personnel working in the public
library9 Number of active readers in county library/100 county inhabitants
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measured in 2005. In the tables, the significant correlations are in boldface
and the level of significance is flagged.
As shown in the table above, the general institutional performance in 2003
is by no means correlated with the wealth of the counties. Moreover, thespecific performances in the three areas of competence taken into account
do not correlate either. On the contrary, the performance in the county
roads and bridges area negatively correlates with both GDP per capita and
net monthly salary. And the same situation is to be found in 2004,
essentially because institutional performance is largely inertial. The
correlations between specific performance in 2003 and 2004 are .713
(p5 .001) for library management, .892 (p5 .001) for child protection
management and .932 (p5 .001) for county roads and bridges management.
At the same time, the correlation between the overall performance in 2003and 2004 is .886 (p5 .001).
Once again, in 2004 the general institutional performance doesnt
correlate either with the gross domestic product or with the net monthly
salary. Specific performances are not related to one another, except the
performances in road and bridge management, on the one hand, and the
performance in library management, on the other. At the same time, both
specific performances negatively correlate with the measures of county
Table 5. Inter-correlations between county institutional performance and financial resources in2004
GDP/capita e
Netmonthlysalary e
Perf_libraries
Perf_roads
Perf_children
Perf_total
GDP/capita e .663*** 7.371* 7.401* .128 7.306
Net monthly salary e .663*** 7.103 7.270 .071 7.178Perf_libraries 7.371* 7.103 .499** 7.090 .624***Perf_roads 7.401** 7.270 .499** 7.170 .726***Perf_children .128 .071 7.090 7.170 .475**Perf_total 7.306 7.178 .624*** .726*** .475**
***p5 .001; **p5 .01; *p5 .05. N 41.
Table 4. Inter-correlations between county institutional performance and financial resources in2003
GDP/capita e
Net monthlysalary e
Perf_libraries
Perf_roads
Perf_children
Perf_total
GDP/capita e .663*** 7.042 7.373* .127 .063Net monthly salary e .663*** .096 7.377* .200 .176Perf_libraries 7.024 .096 .009 .118 .466**Perf_roads 7.373* 7.377* .009 7.056 .451**Perf_children .127 .200 .118 7.056 .870***Perf_total .063 .176 .466** .451** .870***
***p5 .001; **p5 .01; *p5 .05. N 41.
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financial capacity. This observation strengthens the observation that in
2003 poor counties performed equally well or even better than richer
counties.
How can we explain this? We think that the explanation is twofold. Onthe one hand, this could mean that redistribution mechanisms are effective
in Romania, at least in the specific policy area that we have taken into
account. Let us remember that, according to the NHD Report (2005, p. 47),
the distribution of funds (specially collected by the central government and
then redistributed to counties) did not correlate with either the size of the
counties populations or the level of their economic development. Our
findings suggest that poorer counties are more effective in the road and
bridge management area of administrative competence. In fact, this might
well be the effect of the financial redistribution mechanism.On the other hand, the explanation could be that redistribution to poorer
counties in Romania may be a political function of the electoral preferences
expressed by the counties voters. The general electoral pattern in 2004
Romania is characterised by a split between Romanian Communist
successor parties, particularly the Social-Democratic Party (PSD), and
anti-communist parties, particularly the DA alliance between the Liberal
Party and the Democrat Party. The strong and consistent electoral
performance of communist successor parties, according to Pop-Eleches
(2008), is primarily due to their ability to appeal to voters beyond thetraditional base of Eastern European ex-communist parties on the left of the
ideological spectrum. An explanation could be that transition losers,
especially post-communist peasants, vote more frequently with communist
successor parties as a result of their structural dependency. In the rural
regions that before communism were dominated by large estates, peasants
were strictly dependent upon their landlords. They were afterwards sucked
by communist states in the region into the large urbanisation and
industrialisation processes. Although they continued to work the same land
in state-owned farms, poor peasants benefited from unprecedented upwards
social mobility, including large-scale education and political co-option into
the state and party apparatus. The breakdown of the communist welfare
state and its social and economic consequences inclined those peasants to
strongly support communist successor parties (Lubecki 2004). In Romania,
inhabitants of poor rural counties, less educated and less politically
competent, still depend upon local authorities for various kinds of assistance
and redistribution policies. Since half of the peasants are engaged in
subsistence farming, we can imagine why they are severely dependent on
local authorities for various resources, from wood to permits and aid in
cash. In a way, they have been sucked by political elites into a neo-dependency mechanism (Mungiu-Pippidi 2003). According to Mungiu-
Pippidi (2004), the general situation of the Romanian countryside has
turned the peasants into easy prey for local predatory elites who control
resources and therefore politics.
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The redistribution mechanism in Romania may be accompanied by the
control of politics through resources. Thus, the redistribution of central
resources at county level may be motivated by political rather than purely
social purposes. It is plausible that the central governing party favourscounties ruled by its own candidates. In turn, redistribution may influence
both institutional performance and political competition. Using electoral
data from 2004 elections, we measure the relationship between computed
institutional performance and the degree of political competition. When we
look at the electoral competition for county councils, we find that counties
institutional performance is negatively and significantly correlated with the
difference in votes between the DA alliance and the PSD, the ruling party,
between 2000 and 2004 at national level (r7.331, p5 .05). This
correlation suggests that the greater the victory of the opposition at countylevel, the weaker the institutional performance of that county. At the same
time, the PSD is much more favoured by voters from poorer and less
urbanised counties, which seem to perform better than richer counties where
voters support the opposition.
We cannot clearly demonstrate that redistribution is exclusively political,
yet we are interested in the outcomes of further decentralisation in terms of
performance and solidarity. The correlation between the annual institu-
tional performance measures shows the degree of inertia in governing
capacity. In the case of regionalisation without proper equalisationmechanisms, when local resources start to form the bulk of total revenues,
poor regions will start to face increasing gaps in performance and
development. Developed regions will be able to attract much more private
investment by offering better public services; but they will be offering better
public services because they will benefit from larger revenues. In the long
run, with no solidarity mechanisms, development inertia may seriously
disadvantage poor regions.
Conclusion
Though Romania has witnessed in-depth political, economic and social
change during the last 40 years, including the breakdown of the communist
regime, the design of its regions is unchanged since 1968. Apart from the
plausible nationalistic purposes served by this organisation of the national
political space, the current administrative organisation may have the virtue
of successfully smoothing out territorial inequalities (Hansen et al. 1997).
Central government has progressively entrusted local governments with
growing responsibilities and provided them with increasing financial
resources. We have speculated that regional inequalities in economicresources might be transformed into significant differences in the
performance of administrative units in Romania. This is not only a
Romanian issue, but a very important regional issue (Tausz 2002). The
results of our investigation suggest that this is not yet the case. Wealthier
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counties, those who dispose of greater fiscal capacity, do not seem to
provide better public services. On the contrary, in some domains of regional
competence, such as county road and bridge management, poorer counties
perform even better. Yet overall performance seems also to be related tocompetition between the political parties, meaning that the governing party
at national level can use redistribution as political leverage and provide
more resources to counties that are electorally favourable to it. Further
investigation needs to be done to more clearly assess the political purposes
of redistribution. If our speculation turns out to be true, this could be a
threat to regional solidarity, especially in the case where the ruling party is
backed by wealthier counties electorates.
Smoothing out regional disparities is a reasonable political purpose for
the Romanian government to use its fiscal and administrative means, inaccordance with European economic and social cohesion policies. Using a
financial tool like the national special fund for roads, the central
government has managed to smooth out inequalities in financial revenues
and somehow reduce inequalities in counties capacity to deliver public
services. But I do not intend to plead here for excessive administrative and
financial centralisation. It is obvious that Romania needs administrative
autonomy and growing decentralisation in order to receive and spend
European structural funds, and that claims for regional autonomy will
become increasingly loud during effective integration into Europe (Dobre2005). Yet more regional autonomy needs increasing financial autonomy,
which might lead to growing social inequalities that can be geographically
mapped. The results of this research might suggest a possible way in-
between ineffective, paralysing centralisation, and individualistic, full
regional autonomy. Although sub-state reform and regionalisation is almost
a taboo subject for political parties in Romania, uneven economic
development and growing regional disparities will foster the Romanian
debate on economic regional development and solidarity in the near future.
Acknowledgements
The author wishes to thank Violeta Alexandru, director of the Institute for
Public Policy Romania, for the access to a series of institutional
performance measures. He also wishes to thank for valuable comments
the anonymous referees of Local Government Studies.
Notes
1. Available from: https://reader009.{domain}/reader009/html5/0507/5af012c32dffd/5af012ce30f9e.maps/ro_3[Ac-cessed 21 January 2010].
2. Available from: https://reader009.{domain}/reader009/html5/0507/5af012c32dffd/5af012ce30f9e.maps/ro_2[Ac-cessed 21 January 2010].
3. Available from: http://www.mie.ro/_documente/cndr/L315_2004.pdf[Accessed 19 January
2009].
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http://ec.europa.eu/comm/eurostat/ramon/nuts/pngmaps/ro_3.pnghttp://ec.europa.eu/comm/eurostat/ramon/nuts/pngmaps/ro_2.pnghttp://www.mie.ro/_documente/cndr/L315_2004.pdfhttp://www.mie.ro/_documente/cndr/L315_2004.pdfhttp://ec.europa.eu/comm/eurostat/ramon/nuts/pngmaps/ro_2.pnghttp://ec.europa.eu/comm/eurostat/ramon/nuts/pngmaps/ro_3.png8/3/2019 Cazul Romaniei
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4. Available from: http://www.eurodobrogea.ro/Project/description.php [Accessed 5 February
2010].
5. Available from: http://www.provincia.ro/download/Memorandum_en.doc [Accessed 15
January 2009].
6. Available from: http://www.ipp.ro/indicatorideperformanta/detalii.php [Accessed 18 Feb-
ruary 2009].
7. Available from: http://www.culturanet.ro/downloads/rapoarte/rap3-BAROMETRU%20
CULTURAL%202005%20RAPORT%20PRELIMINAR.pdf[Accessed 7 February 2010].
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