respectively. The paper presents a revised version from that presented at a World Bank Decentralization and Subnational Economics thematic group seminar held on October 18, 2005. Special thanks goes to Lily Liu and Serdar Yilmaz for serving as discussants. All views and remaining errors are those of the authors, and do not necessarily represented those of the World Bank. Support for this paper was also provided through a Japan PHRD grant to the Government of Rwanda to assist in ongoing territorial consolidation reforms.