Resumen:
The second generation fiscal federalism (SGFF) approach is used as a reference to
analyze the political and fiscal institutional design of Bolivia’s decentralization model and its
evolution. Subnational public finance data up to 2008 is used to verify that decentralization of
expenditure was higher than that of revenue, establishing a context of vertical fiscal imbalance
that increased due to growing fiscal transfers during the positive external shock (boom)
period. Consequently, the subnational fiscal surplus was not a result of internal efficiency but
of excess revenues from such transfers. Panel models were estimated to identify and assess the
implicit incentives embedded in fiscal institutions of the decentralization model.