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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

648 D. Dragoman

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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).

650 D. Dragoman

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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

652 D. Dragoman

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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.

654 D. Dragoman

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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

656 D. Dragoman

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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

658 D. Dragoman

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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.

664 D. Dragoman

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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.png


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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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