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Poverty Alleviation in a Decentralized System

This analysis delves into the complexities of poverty alleviation within Hungary's decentralized system, highlighting the roles of central and local governments. It discusses the importance of local responsiveness to poverty, the challenges posed by unclear mandates, and the necessity for adequate funding in social assistance programs. It emphasizes that while local administration can effectively target benefits, systemic fragmentation leads to inefficiencies. The paper argues for a balanced approach, combining central mandates with local management to maximize the impact on poverty alleviation.

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Poverty Alleviation in a Decentralized System

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  1. Poverty Alleviation in a Decentralized System • Poverty alleviation: general versus local public good? • Local responsiveness to poverty might vary depending on local priorities • Better information at the local level calls for local administration of social programs • In a decentralized system poverty alleviation is ideally centrally mandated, centrally financed, locally managed 1/5

  2. Poverty Alleviation in Hungary the role of the CG • LGs have broad mandate in social assistance (Act on Social Assistance) • Unclear mandate with respect to long-term poverty, especially regarding • the long-term unemployed • the Roma 2/5

  3. Poverty Alleviation in Hungaryfinancing • CG has transferred responsibilities without ensuring adequate funding • centrally mandated services interpreted as ‘optional’ • ‘3200 social policies’ (the amount of benefits, and access to institutional social services is unequal across the country) • General purpose transfers are not the best tools to protect the poor 3/5

  4. Poverty Alleviation in Hungarythe role of LGs • Local administration is effective in targeting cash and in-kind benefits • Fragmented LG system and limited incentives for cooperation in service delivery results in fragmented (and hence costly) institutional care system 4/5

  5. Structure of Social Assistance in Hungary CG and LGs have shared responsibilities in social protection in Hungary: • Universal benefits: central government task, centrally financed, centrally administered (e.g. GYES, Family allowance, Maternity benefit, Unemployment insurance) • Targeted benefits: centrally mandated, locally managed - shared financing through earmarked matching funds (partial reimbursement) (Unemployment benefit for long-term unemployed, Old age allowance, GYET, Support for establishing the first home, Advancement for child alimentation fee) - shared financing through general purpose grants (normative grants) (Regular social assistance, Regular child protection normative, Extraordinary child protection benefit) - locally financed (Cash: Housing maintenance, Medical treatment fee, Temporary assistance, funeral benefit; In kind: Public burial, Public health card, Public food, House care, Mental support to families; ) • Institutional care: centrally mandated, locally financed, locally managed (Special homes, Rehabilitation institutes, Day-care homes, Temporary homes) 5/5

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