engagement, like public planning meetings, participatory budgeting, report cards and user satisfaction surveys.

Despite these many ways to promote accountability, empowerment of citizens and local governments is seldom fully realized because decentralization is often incomplete. This occurs either because central governments are reluctant to fully decentralize or because government employees resist giving up their career opportunities at the national level (Blair 2000). As a result, field officers maintain strong links with their original line ministries, thereby enjoying some insulation against local control. Hence, local administrators are not fully accountable to elected representatives, who in turn are not always accountable to the citizenry. In these cases, local governments continue to report to upper tiers of government, which partially remain in control of their political, administrative, and financial conditions. For example, when local finances are too centralized and budgets mostly consist of national revenue sources, local governments are more responsive to the upper tiers of government than to citizens’ needs. In practice, this reduces the capacity of both citizens and local electoral representatives to make effective choices.

# **2. Fiscal determinants of empowerment**

Decentralization entails a downward shift of authority and resources from central to subnational governments; thus, local governments increase their revenue sources and expenditure responsibilities. In developing countries, subnational revenues as percentage of GDP more than doubled from 2.3 percent in 1980 to 5.5 percent in 1999. Similarly, subnational expenditures as percentage of GDP doubled from 3 percent in 1980 to 6.1 percent in 1997 (Shah 2004). In decentralized governments, control over the use of resources also shifts from central governments to citizens and voters, who are the ultimate users of goods and services. In the past, local governments could attribute their inability to deliver services to weak fiscal conditions, but now that they have access to more –yet limited– revenue sources, citizens turn to them for an efficient and responsible management of public resources.

In this new context of local responsibility, accountability is crucial for effective choice. If citizens are to ensure proper use of public resources, they need the means to hold local governments accountable. Studies on local governance have gone a long way to explain how citizens engage with and hold their governments accountable (Ackerman 2004) and how the process and mechanisms for state-citizen interaction function (Alsop and Kurey 2004). However, these studies have not yet systematically looked at the impact that local _public finances_ have on these state-citizen interaction, and more generally at the distribution of power at the local level.

Although not abundant, there are a number of studies on the matter. Of the three factors explored in this paper (revenues, expenditures, and costs), local public expenditures have received most attention, but here studies have mainly focused on the processes and mechanisms by which local governments are held accountable for expenditure-related activities, such as participatory budgeting, score cards, and parent associations (Ackerman 2004). Unlike expenditures, local revenues and the costs of engagement have been given 5