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Local Government Studies

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Regional Inequalities, Decentralisation and the Performance of Local Governments in Post-Communist Romania
Drago Dragoman
a a

Department 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 To link to this article: http://dx.doi.org/10.1080/03003930.2011.623010

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Local Government Studies Vol. 37, No. 6, 647669, December 2011

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Regional Inequalities, Decentralisation and the Performance of Local Governments in Post-Communist Romania
DRAGOS DRAGOMAN
Department 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 is to investigate regional disparities, to underline the role of governmental mechanisms in smoothing out territorial inequalities, and to examine the possible eects of regional economic disparities on the performance of regional administrations in delivering public services, in the light of the new regionalisation debate. The conclusion is that Romanian counties institutional performance does not completely correlate with regional wealth; but regional disparities and the mechanisms used to smooth 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 specic European economic

Correspondence Address: Dragos Dragoman, Lucian Blaga University of Sibiu, Department of Political Science, 34 Calea Dumbrvii, 550324 Sibiu, Romania. a E-mail: dragos.dragoman@ulbsibiu.ro 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 eect 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 is essential 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 performance. 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 rst on the existing regional design. Then it will briey review the main ndings concerning regional disparities and mechanisms for smoothing out inequalities in Romania. Finally, it will discuss a very important issue related to inequality: institutional performance at county level in three administrative domains. The conclusion is that regional inequalities do not currently aect 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 arguments, 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 subunits, 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 1877 1878 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 rst reformatted the territorial administration into districts and oblasts, having in mind a soviet type of organisation. Under this type of administrative organisation, the Hungarian minority in Transylvania enjoyed a certain degree of autonomy. However, the 1968 communist reform of administration 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 legal entities accepted by the constitution and by the Law on Local Public Administration in 1991 were counties. Although modern Romania was born by binding together dierent 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 postcommunist 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 European Union structures and had to face the challenges of regional development

Figure 1. Counties in Romania, with county capital cities marked by dots.

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Figure 2. Romania counties (statistical regions NUTS III).

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

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Figure 3. Romania development regions (statistical regions NUTS II).

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

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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 designated according 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 dierences between regions. On the other hand, such developed and disadvantaged areas have complementary potential for development. In fact, each region is designed to have central and peripheral sub-regions. Whereas central subregions are characterised by higher levels of human capital, peripheral subregions 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 only formal 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 development councils. As underlined earlier, these are not legal entities and only coordinate the various regional programmes that are eectively run by regional development agencies. These agencies are non-prot, non-governmental and legal entities that project, implement and overview development policies at regional level. The nancing of regional policies is the result of a special fund, the Regional Development Fund, which is built on the nancial contributions of the Romanian government, counties, private entities, banks, foreign investors, the EU and other international institutions.3 The general regional development policy at national level is run by the 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 nancing 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 nancing 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 scal decentralisation would provide the macro-regions with the necessary tools to eectively promote regional autonomy and development. Development regions situated on Romanias borders can be part of wider cross-border cooperation structures, e.g. the Euro-regions (Popescu 2008). Romanian border regions are part of 11 such Euro-regions, or other transborder 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-InnoRegio Project that aims to set the cooperation priorities in the areas of energy and environment between Romanian Region 5 and the Hungarian South-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 diculties, such as dierent administrative levels from those of its partners, dierent degrees of decentralisation of regions, economic disparities, lack of nancial 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 Constant a (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 benets from special funding from the European Regional Development Fund.

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Counties, and not regions, are the administrative units xed 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 local governments 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 is responsible 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 nancing 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 nancial autonomy of local governments. The pre-1998 nancial system was based almost entirely on state budget transfer payments, which made things very dicult for local governments nancial management. Todays local budgets encompass taxes, duties, other scal revenues, non-scal 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, Peteri 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 even regionalisation in order to benet 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 and cultural. First, the existing local political organisation and centralisation come from an ethnic Romanian denition of the state (Weber 2000), which is strengthened by the RomanianHungarian conict in Transylvania. Fearing the Hungarian threat to Romanian statehood, Romanian nationalists and centralists always invoke the so-called conict 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 (Molnar 2000a). Second, Transylvania would be accepted as a Romanian province that largely diered from the rest of the country in terms of historical cultural heritage, ethnic composition and even electoral behaviour (Molnar 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 its regions. According to them, a centralised administrative system in Romania largely favours corruption and bureaucracy and amplies the inherent deciencies 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 redene 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 structural decision 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 nds 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 nancing aects governance capacity, and what would happen in the poor, unsustainable counties and regions of Romania after regionalisation. Do rich counties today perform better than poor ones? Do they deliver better public services? And what are the nancial 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 ftieth anniversary of 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 undertaken 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 dierent 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, Muller 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 and Warsaw. Determining factors such as location, inherited economic structure and environmental quality make them less attractive for investments, making it more dicult 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 benet from the European structural funds (Grzegorz Grosse 2006; Weltrowska 2002). The restructuring 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 eort 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 benet 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 Transylvania 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 the industrialisation gaps that favoured Transylvanian towns before 1918. A new, articial urbanism was born from this articial industrialisation, which tended to suppress traditional Romanian villages (Chen 2003). It nally 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 takeo, following the 2005 scal reform that instituted a 16 per cent at 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 prole. According to UNDP, the current human development prole of Romania conrms 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 sucient 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 rst look at the eight development regions that were formalised in 1997, we can easily 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 development. 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. These regions 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 dened 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 nancial 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 the inequalities in resources between counties and between local communities within counties. These funds are distributed by central government to counties by taking into account their scal capacity to collect personal income tax. However, as emphasised in the NHD Report (2005, p. 46), an unintended

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Table 1. Regional indicators for Romania

Development regions 2,932.8 2,029.3 2,661.3 2,447.0 2,443.9 3,363.7 2,850.7 3,056.9 5,616.7 14.7 11.6 14.1 13.2 13.0 15.2 13.3 14.7 23.9 7.2 5.7 7.9 9.2 6.6 6.7 5.9 8.4 6.9

Population (1,000 inh.), 2004 Unemployment rate (%), 2005

GDP per head in euro, 2004 GDP per head in PPS (index, EU-27 100), 2004

High educational attainment of persons aged 2564 (% total), 2005 11.1 9.4 8.5 7.9 10.6 10.9 9.1 9.7 25.4

% of the population aged 65, 2004

Regional Inequalities in Romania

Romania Region 1, Region 2, Region 3, Region 4, Region 5, Region 6, Region 7, Region 8,

North-East South-East South South-West West North-West Center Bucharest

21,673 3,737 2,851 3,342 2,318 1,938 2,741 2,537 2,208

14.4 14.0 14.0 16.2 15.9 14.1 13.4 13.4 14.4

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Table 2. The county composition of development regions Regions Region Region Region Region Region Region Region Region 1, 2, 3, 4, 5, 6, 7, 8, North-East South-East South South-West West North-West Centre Bucharest Counties Bacu, Botos ani, Neamt , Ias i, Suceava, Vaslui a Brila, Buzu, Constant a, Galat i, Tulcea, Vrancea a a Arges , Clras i, Dambovit a, Giurgiu, Ialomit a, Prahova, Teleorman aa Dolj, Gorj, Mehedint i, Olt, Valcea Arad, Caras -Severin, Hunedoara, Timis Bihor, Bistrit a-Nsud, Cluj, Maramures , Satu-Mare, Slaj aa a Alba, Bras ov, Covasna, Harghita, Mures , Sibiu Bucharest

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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 has increased the variations in per capita resources of local governments, and inequalities in resources among local governments are larger than the GDP per capita dierentials. Despite this unintended eect 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, its technical status and the level of trac. 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 eect 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 inuences the growth rates of countries included in World Values Surveys. When generalised to the 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

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denitions and research design, their statistical analysis suggests that the eect 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. Putnams bold 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 eect, while corporatist political networks show a negative eect. 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 development disparities 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 nd a positive and signicant correlation at county level in Romania, which may serve as a warning about further decentralisation and future solidarity mechanisms, with signicant 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 specic 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 trac is not conned 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 diculties 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 the reintegration of children into the natural family was favoured over nancing 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 that is 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 specic activities) and for public library performance (mean scale of nine specic activities). All the domains of competence and their related specic 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-specic competence and overall performance would be related to the nancial 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 eective in managing their competence domains. Looking at Table 1, we expect to nd 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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Table 3. Indices of institutional performance at county level in Romania Domain/item A 1 2 3 4 5 6 7 8 9 10 11 B 1 2 3 4 5 6 7 C 1 2 3 4 5 6 7 8 9

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Road management The county council has elaborated a strategy in order to modernise county roads and bridges Proportion of modernised roads in the overall road network Proportion of dirt roads in the overall road network Proportion of expired road in the overall road network The county council has elaborated a bridge classication regarding the risk categories Mean duration between two modernisation interventions on the same road span Mean duration of maintenance work on county roads Mean duration of modernisation work on county roads External funds drawn by county council for roads and bridges Proportion of investment funds from the overall spending funds on county roads and bridges Spending for qualifying, perfecting and training specialised personnel in roads and bridges department Child protection The county council has elaborated a strategy for child protection External funds drawn by county council for child protection area Proportion of specialised personnel from the entire personnel working in child protection area Proportion of children placed in extended family (relatives until the fourth grade) from the whole number of children placed in families Number of children included in the protection system that changed the maternal assistant twice a year Number of pregnant young girls (aged of 1216 years) included in the child protection system Number of children from the child protection system in police records for anti-social acts County libraries Proportion of readers from outside county capital city from the overall active readers County library does have a webpage County library does use an instrument for measuring readers satisfaction County library does open during weekends External funds drawn by county council for public library Number of book transactions vs. number of active readers Proportion of spending for books and publications from the overall library spending Spending for qualify, perfection and train specialised personnel working in the public library Number of active readers in county library/100 county inhabitants

regions are situated at mid-scale (Bras ov, Arad) and even at lower-middle scale (Sibiu, Timis ), while counties from poorer regions are at the top of the performance scale (Valcea, Dambovit a, Teleorman). Surprisingly enough, the highest performing county for 2003 is Botos ani, from Region 1, one of the poorest counties in Romania, and for 2004 it is Dambovit a, from Region 3. We now measure the relationship between institutional performance and the wealth of counties. There are no signicant 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

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measured in 2005. In the tables, the signicant correlations are in boldface and the level of signicance is agged. As shown in the table above, the general institutional performance in 2003 is by no means correlated with the wealth of the counties. Moreover, the specic 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 specic performance in 2003 and 2004 are .713 (p 5 .001) for library management, .892 (p 5 .001) for child protection management and .932 (p 5 .001) for county roads and bridges management. At the same time, the correlation between the overall performance in 2003 and 2004 is .886 (p 5 .001). Once again, in 2004 the general institutional performance doesnt correlate either with the gross domestic product or with the net monthly salary. Specic 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 specic performances negatively correlate with the measures of county

Table 4. Inter-correlations between county institutional performance and nancial resources in 2003 GDP/ capita e GDP/capita e Net monthly salary e Perf_libraries Perf_roads Perf_children Perf_total .663*** 7.024 7.373* .127 .063 Net monthly salary e .663*** .096 7.377* .200 .176 Perf_ libraries 7.042 .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***

***p 5 .001; **p 5 .01; *p 5 .05. N 41.

Table 5. Inter-correlations between county institutional performance and nancial resources in 2004 GDP/ capita e GDP/capita e Net monthly salary e Perf_libraries Perf_roads Perf_children Perf_total .663*** 7.371* 7.401** .128 7.306 Net monthly salary e .663*** 7.103 7.270 .071 7.178 Perf_ 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**

***p 5 .001; **p 5 .01; *p 5 .05. N 41.

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nancial 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. On the one hand, this could mean that redistribution mechanisms are eective in Romania, at least in the specic 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 ndings suggest that poorer counties are more eective in the road and bridge management area of administrative competence. In fact, this might well be the eect of the nancial 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 the traditional 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 beneted 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 neodependency mechanism (Mungiu-Pippidi 2003). According to MungiuPippidi (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 favours counties ruled by its own candidates. In turn, redistribution may inuence 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 nd that counties institutional performance is negatively and signicantly correlated with the dierence in votes between the DA alliance and the PSD, the ruling party, between 2000 and 2004 at national level (r 7.331, p 5 .05). This correlation suggests that the greater the victory of the opposition at county level, 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 institutional performance measures shows the degree of inertia in governing capacity. In the case of regionalisation without proper equalisation mechanisms, 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 oering better public services; but they will be oering better public services because they will benet 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 nancial resources. We have speculated that regional inequalities in economic resources might be transformed into signicant dierences 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 scal 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 to competition 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 scal and administrative means, in accordance with European economic and social cohesion policies. Using a nancial tool like the national special fund for roads, the central government has managed to smooth out inequalities in nancial revenues and somehow reduce inequalities in counties capacity to deliver public services. But I do not intend to plead here for excessive administrative and nancial 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 eective integration into Europe (Dobre 2005). Yet more regional autonomy needs increasing nancial autonomy, which might lead to growing social inequalities that can be geographically mapped. The results of this research might suggest a possible way inbetween ineective, 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: http://ec.europa.eu/comm/eurostat/ramon/nuts/pngmaps/ro_3.png [Accessed 21 January 2010]. 2. Available from: http://ec.europa.eu/comm/eurostat/ramon/nuts/pngmaps/ro_2.png [Accessed 21 January 2010]. 3. Available from: http://www.mie.ro/_documente/cndr/L315_2004.pdf [Accessed 19 January 2009].

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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 February 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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