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Political Decentralization


  • Dilip Mookherjee

    () (Department of Economics, Boston University, Boston, Massachusetts 02215)


I provide a critical overview of the literature on political decentralization. After reviewing first- and second-generation theories of federalism, I describe recent empirical studies focusing mainly on determinants of capture and local government accountability emphasized by second-generation theories. The article concludes by describing emerging new issues that deserve more attention in future research: a wider range of political distortions beyond capture and corruption; effects of decentralization on intercommunity allocations, learning, and experimentation, and on democracy itself; a comparison of decentralization with other organizational alternatives; and issues pertaining to design and implementation raised by first-generation federalism theories, such as interjurisdictional spillovers, vertical fiscal relations, the range of devolution, and the political economy of implementation.

Suggested Citation

  • Dilip Mookherjee, 2015. "Political Decentralization," Annual Review of Economics, Annual Reviews, vol. 7(1), pages 231-249, August.
  • Handle: RePEc:anr:reveco:v:7:y:2015:p:231-249

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    Cited by:

    1. Perez-Sebastian, Fidel & Raveh, Ohad, 2016. "Natural resources, decentralization, and risk sharing: Can resource booms unify nations?," Journal of Development Economics, Elsevier, vol. 121(C), pages 38-55.
    2. Pranab Bardhan & Sandip Mitra & Dilip Mookherjee & Anusha Nath, 2018. "Resource Transfers to Local Governments: Political Manipulation and Household Responses in West Bengal," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-319, Boston University - Department of Economics.
    3. Guo Xu & Marianne Bertrand & Robin Burgess, 2018. "Social Proximity and Bureaucrat Performance: Evidence from India," NBER Working Papers 25389, National Bureau of Economic Research, Inc.
    4. Marco Catola, 2019. "Partial decentralisation and inter-governmental electoral competition in local public good provision," Discussion Papers 2019/243, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    5. Jean-Philippe Platteau & Guilia Camilotti & Emmanuelle Auriol, 2017. "Eradicating women-hurting customs: What role for social engineering?," WIDER Working Paper Series 145, World Institute for Development Economic Research (UNU-WIDER).
    6. Estache, Antonio & Garsous, Grégoire & Seroa da Motta, Ronaldo, 2016. "Shared Mandates, Moral Hazard, and Political (Mis)alignment in a Decentralized Economy," World Development, Elsevier, vol. 83(C), pages 98-110.
    7. Changwony, Frederick Kibon & Paterson, Audrey S., 2019. "Accounting practice, fiscal decentralization and corruption," The British Accounting Review, Elsevier, vol. 51(5).
    8. Anusha Nath & Dilip Mookherjee, 2017. "Resource Transfers to Local Governments: Political Manipulation and Voting Patterns in West Bengal," 2017 Meeting Papers 1266, Society for Economic Dynamics.
    9. Pranab Bardhan, 2016. "State and Development: The Need for a Reappraisal of the Current Literature," Journal of Economic Literature, American Economic Association, vol. 54(3), pages 862-892, September.

    More about this item


    accountability; capture; corruption; democracy; devolution; federalism;

    JEL classification:

    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies


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