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Political Accountability, Fiscal Conditions, and Local Government Performance – Cross-Sectional Evidence from Indonesia

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  • Sebastian Eckardt
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    Abstract

    What makes governments tick? Why are some public institutions more successful than others in managing resources and delivering services? And even more vitally, how can malfunctioning institutions be reformed so that they perform their responsibilities more effectively? This paper contributes to our understanding of theses overarching questions by exploring the interactions between political institutions and public sector performance in the context of decentralization and local governance. It shows -both theoretically and empirically- that performance outcomes are determined by the extent to which people can hold their governments accountable through political institutions. The basic hypothesis underlying this research is that political accountability, either by encouraging sanctions upon non-compliant public agents or simply by reducing the informational gap regarding government activities, will create forceful incentives for elected officials and civil servants to reduce opportunistic behavior and improve performance. Using a cross-sectional regression the hypothesis is empirically tested against evidence from newly empowered local governments in Indonesia. The empirical findings broadly support our hypotheses. Improved public services on the ground, both in terms of quantity and quality, require informed and well functioning decision making processes that allocate resources to priority areas that meet the demand of the broader community.

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    Bibliographic Info

    Paper provided by Institute of Local Public Finance in its series Working Papers with number 02-2007.

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    Length: 31 pages
    Date of creation: Feb 2007
    Date of revision:
    Handle: RePEc:lpf:wpaper:02-2007

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    Web page: http://www.ilpf.de/

    Related research

    Keywords: governance; public services; fiscal decentralization;

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    1. Wildasin, David E., 1998. "Fiscal aspect of evolving federations : issues for policy and research," Policy Research Working Paper Series 1884, The World Bank.
    2. Bardhan, Pranab & Mookherjee, Dilip, 2002. "Relative Capture of Local and Central Governments: An Essay in the Political Economy of Decentralization," Center for International and Development Economics Research, Working Paper Series qt9gx7t5hd, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
    3. Mariano Tommasi & Federico Weinschelbaum, 2000. "A Principal-Agent Building Block for the Study of Decentralization and Integration," Econometric Society World Congress 2000 Contributed Papers 0457, Econometric Society.
    4. Seabright, Paul, 1994. "Accountability and Decentralization in Government: An Incomplete Contracts Model," CEPR Discussion Papers 889, C.E.P.R. Discussion Papers.
    5. Tim Besley & Stephen Coate, . "An Economic Model of Representative Democracy," Penn CARESS Working Papers ecf70d639d700dba5327ab0c8, Penn Economics Department.
    6. Timothy Besley & Robin Burgess, 2000. "The Political Economy of Government Responsiveness: Theory and Evidence from India," STICERD - Development Economics Papers - From 2008 this series has been superseded by Economic Organisation and Public Policy Discussion Papers 28, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    7. Persson, Torsten & Roland, Gerard & Tabellini, Guido, 1997. "Separation of Powers and Political Accountability," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1163-1202, November.
    8. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
    9. Lockwood, Ben, 1998. "Distributive Politics and the Benefits of Decentralisation," CSGR Working papers series 10/98, Centre for the Study of Globalisation and Regionalisation (CSGR), University of Warwick.
    10. Dilip Mookherjee & Pranab K. Bardhan, 2000. "Capture and Governance at Local and National Levels," American Economic Review, American Economic Association, vol. 90(2), pages 135-139, May.
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