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AbstractThis article examines the political economy of fiscal transfers in Ethiopia. Utilising an original data set spanning 1995–2020, as well as interviews and document analyses, the article illustrates how different factors interact to shape the distribution of grants. Statistical analysis indicates that population size is critical in determining regional grant shares. However, the analyses reveal a pattern of ethno‐regional favouritism in grant distributions during the early stages of Ethiopian federalism. During that period, opaque and centralised decision‐making processes, coupled with the dominant influence of the Tigray People's Liberation Front in the federal government, resulted in grant distribution deviating from principles of fiscal equity. Over time, this evolved into more fluid forms of negotiation influenced by intra‐party competition, dynamics of bargaining between the central and regional authorities, and regional assertiveness, collectively shaping the allocation of grants alongside the grant formula. The analysis highlights how economically and politically marginalised regions are disadvantaged, especially when their population is small. The absence of an independent grant agency means that political considerations continue to affect seemingly formula‐driven allocations. The Ethiopian case underscores how intra‐party bargaining and alignment along ethnic and regional lines undermine the effectiveness of formula‐based grant allocations in the absence of an independent and empowered grant agency.

AbstractThis article provides an in‐depth analysis of fiscal decentralization in Ethiopia from 1994/95 to 2019/20, focusing on five fiscal categories: regional own‐source revenues, regional tax autonomy, regional borrowing, federal grants, and conditional grants. To measure fiscal de/centralization, the study constructs original data sets based on reports from various organizations over multiple years. The analysis results demonstrate that fiscal de/centralization varies temporally and spatially. While improved capacity is associated with enhanced own‐source revenue, the desire to improve regional fiscal management often results in fiscal centralization. Further, although Ethiopian regions have constitutional powers to determine the bases and rates of regional taxes, the central government has significant influence in such matters, often manipulating regional affairs in disregard of the constitution. The article reveals substantial variations of own‐source revenues across regions attributed to regional differences in capacity, development, location, and investment distribution. The article highlights the importance of a systematic understanding of region‐specific challenges to accurately assess the effectiveness of decentralization policies in the global South. Insights from Ethiopia are of great importance to policymakers looking to embrace fiscal decentralization in developing countries.

AbstractThis article measures regional policy autonomy and explains the factors that drive autonomy variation in land policy from 1995 to 2020, taking Ethiopia, the late twentieth-century adoption of federalism and a federation of very diverse regions, as a case. By comparing three regions, Benishangul-Gumuz, Oromia, and Southern Nations, Nationalities and Peoples, the article shows that de facto regional policy autonomy varies, although the regions are constitutionally symmetrical. Why do some regions have less de facto autonomy than others? Contrary to conventional expectations, party noncongruence appears less important in explaining the regional autonomy variation. Regional capacity, national integration goals and development objectives appear to have played a major role in generating de facto regional policy autonomy variation without a constitutional amendment. Regions lacking capacity and peripheral regions tend to face more centralization than others. Insights from Ethiopia imply that states embracing federalism should consider regional inequality in development and capacity in designing a federal constitution.

Ethiopia is the most prominent example of the late 20th-century adoption of federalism to accommodate diversity and complete state-building. This article explores the implementation of federalism and accommodation of ethnonational diversity in dominant party regimes by using Ethiopia as a case. Drawing on legal documents, literature, news sources and government reports, the article argues that federalism enabled distinctive groups to promote their culture, use their languages and exercise self-rule in their territory. However, ethnonationalities' constitutionally proclaimed self-determination rights and the practice rarely correspond. Although all ethnonationalities have the same constitutional rights, some are still subjugated, and self-rule remains their dream. The dominant party regime in Ethiopia met demands for self-rule and accommodation with suppression and violence. The constitution grants regions to use their legislative powers to accommodate region-specific demands; nevertheless, regions cannot operate out of the narrow framework of the federal ruling party. Thus, regions became repressive agents of the centre rather than genuine self-rule agents. Insights from Ethiopia have broader implications for states embracing federalism.

Ethiopia is the most prominent example of the late 20th-century adoption of federalism to accommodate diversity and complete state-building. This article explores the implementation of federalism and accommodation of ethnonational diversity in dominant party regimes by using Ethiopia as a case. Drawing on legal documents, literature, news sources and government reports, the article argues that federalism enabled distinctive groups to promote their culture, use their languages and exercise self-rule in their territory. However, ethnonationalities' constitutionally proclaimed self-determination rights and the practice rarely correspond. Although all ethnonationalities have the same constitutional rights, some are still subjugated, and self-rule remains their dream. The dominant party regime in Ethiopia met demands for self-rule and accommodation with suppression and violence. The constitution grants regions to use their legislative powers to accommodate region-specific demands; nevertheless, regions cannot operate out of the narrow framework of the federal ruling party. Thus, regions became repressive agents of the centre rather than genuine self-rule agents. Insights from Ethiopia have broader implications for states embracing federalism.