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Decentralization, Fiscal Effort and Social Progress in Colombia at the Municipal Level, 1994-2009: Why Does National Politics Matter?

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  • Fabio Sánchez Torres
  • Mónica Pachón

Abstract

The present paper explores the relationship between political competition and effective public goods delivery systems in a decentralized context to study whether the awareness generated through such a competitive environment and the existence of more political options are a part of the causal mechanisms for effective governance. In particular, we want to observe the effect of electoral competition on the incentives to build fiscal capacity and provide public goods such as education and water, that are to a large extent the responsibility of the local municipalities. The research hypothesis is that political competition strengthens the decentralized municipalities through building their local fiscal capacity. In turn, the fiscal capacity is the fundamental variable that explains the differences in sector performance across local governments. Local fiscal capacity brings about better policy outcomes, as well as a better match between resources and the needs - what we call responsiveness - which simultaneously ensures greater efficiency in local spending. Using a rich panel municipal dataset from 1994 till 2009, we have shown that on comparing the differences across education and the water and sewerage sectors, the power of fiscal effort appears to be the driving force behind better policy outcomes than any other resource commonly made available to the municipalities, such as national transfers or royalties.

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Bibliographic Info

Paper provided by Inter-American Development Bank in its series IDB Publications with number 81418.

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Date of creation: Jul 2013
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Handle: RePEc:idb:brikps:81418

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Keywords: Democracy; Decentralization; fiscal policy; local policy; water; sanitation;

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  1. Ligia Melo Becerra, 2005. "Impacto De La Descentralización Fiscal Sobre La Educación Pública Colombiana," BORRADORES DE ECONOMIA, BANCO DE LA REPÚBLICA 002802, BANCO DE LA REPÚBLICA.
  2. Jean-Paul Faguet & Fabio Sanchez, 2006. "Decentralization´S Effects On Educational Outcomes In Bolivia And Colombia," DOCUMENTOS CEDE, UNIVERSIDAD DE LOS ANDES-CEDE 002255, UNIVERSIDAD DE LOS ANDES-CEDE.
  3. Fisman, Raymond & Gatti, Roberta, 2002. "Decentralization and corruption: evidence across countries," Journal of Public Economics, Elsevier, Elsevier, vol. 83(3), pages 325-345, March.
  4. Weingast, Barry R., 2009. "Second generation fiscal federalism: The implications of fiscal incentives," Journal of Urban Economics, Elsevier, Elsevier, vol. 65(3), pages 279-293, May.
  5. Faguet, Jean-Paul, 2004. "Does decentralization increase government responsiveness to local needs?: Evidence from Bolivia," Journal of Public Economics, Elsevier, Elsevier, vol. 88(3-4), pages 867-893, March.
  6. Marcela Meléndez & Andrés Gómez-Lobo Echeñique, 2007. "Social Policy, Regulation and Private Sector water supply: the case of Colombia," Working Papers, University of Chile, Department of Economics wp252, University of Chile, Department of Economics.
  7. Rodríguez, Catherine, 2010. "Correspondencia de economía política y decisiones de educación en las familias después de la descentralización," El Trimestre Económico, Fondo de Cultura Económica, Fondo de Cultura Económica, vol. 0(308), pages 977-1006, octubre-d.
  8. Jean-Paul Faguet & Fabio Sánchez, 2009. "Decentralization and Access to Social Services in Colombia," DOCUMENTOS CEDE, UNIVERSIDAD DE LOS ANDES-CEDE 005401, UNIVERSIDAD DE LOS ANDES-CEDE.
  9. Guillermo Perry & Mauricio Olivera, 2010. "El impacto del petróleo y la minería en el desarrollo regional y local en Colombia," WORKING PAPERS SERIES. DOCUMENTOS DE TRABAJO, FEDESARROLLO 009070, FEDESARROLLO.
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