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GOVERNANCE FROM BELOW A Theory of Local Government With Two Empirical Tests

  • Jean-Paul Faguet

I examine decentralization through the lens of the local dynamics that it unleashes. The national effects of decentralization are simply the sum of its local-level effects. Hence to understand decentralization we must first understand how local government works. This paper proposes a theory of local government as the confluence of two quasi-markets and one organizational dynamic. Good government results when these three elements - political, economic and civil - are in rough balance, and actors in one cannot distort the others. Specific types of imbalance map into specific forms of government failure. I use comparative analysis to test the theory's predictions with qualitative and quantitative evidence from Bolivia. The combined methodology provides a higher-order empirical rigor than either approach can alone. The theory proves robust.

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Paper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Political Economy and Public Policy Paper Series with number 12.

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Date of creation: Aug 2005
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Handle: RePEc:cep:stipep:12
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  1. Anthony Downs, 1957. "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, University of Chicago Press, vol. 65, pages 135.
  2. Olivier Blanchard & Andrei Shleifer, 2001. "Federalism With and Without Political Centralization: China Versus Russia," IMF Staff Papers, Palgrave Macmillan, vol. 48(4), pages 8.
  3. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817.
  4. Weingast, Barry R, 1995. "The Economic Role of Political Institutions: Market-Preserving Federalism and Economic Development," Journal of Law, Economics and Organization, Oxford University Press, vol. 11(1), pages 1-31, April.
  5. K. Palda & Kristian Palda, 1985. "Ceilings on campaign spending: Hypothesis and partial test with Canadian data," Public Choice, Springer, vol. 45(3), pages 313-331, January.
  6. Keith Poole & Thomas Romer, 1985. "Patterns of political action committee contributions to the 1980 campaigns for the United States House of Representatives," Public Choice, Springer, vol. 47(1), pages 63-111, January.
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