The mismatch between the responsibilities and capacities of local governments (“mismatch problem”) is a global problem that needs to be addressed. This chapter sketches out the status quo of responsibility allocation in different countries, with a focus on the differentiation of rural and urban areas, and analyzes the criteria used for assigning responsibilities. With the help of these insights, a new allocation framework based on the criteria of “balance”, “complexity”, and “flexibility” is introduced. By adding balance through criteria considering the challenges and the capabilities of municipalities, adding complexity by having a four-tier municipality system and adding flexibility by allowing the municipalities to make certain choices regarding responsibility allocation themselves, mismatch problems can be reduced in the future.