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Relative Capture of Local and Central Governments: An Essay in the Political Economy of Decentralization

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  • Pranab Bardhan
  • Dilip Mookherjee

Abstract

A common presumption is that decentralization is prone to a potential pitfall owing to the greater vulnerability of local governments to capture by local elites. We investigate the determinants of relative capture of local and national governments theoretically, in the context of an extended version of the Baron-Grossman-Helpman model of electoral competition with lobbying by special interest groups. A number of factors do provide support to the traditional presumption, such as reduced cohesiveness of interest groups, higher levels of voter awareness, and greater electoral competition at the national level. A number of other factors may, however, create an opposite tendency for lower capture at the local level. These include less electoral uncertainty at the national level, and a higher value of campaign funds in national elections owing to their fungibility across different districts. Relative capture also depends on heterogeneity across districts with respect to levels of local inequality and poverty: accordingly decentralization will tend to increase capture in high inequality districts and lower it in low inequality districts. Power-sharing between parties at the national level, due either to coalition governments or proportional representation, limits the extent of national capture. We conclude that empirical research is necessary to investigate the extent and determinants of relative capture.
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Suggested Citation

  • Pranab Bardhan & Dilip Mookherjee, 1999. "Relative Capture of Local and Central Governments: An Essay in the Political Economy of Decentralization," Boston University - Institute for Economic Development 97, Boston University, Institute for Economic Development.
  • Handle: RePEc:fth:bosecd:97
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    References listed on IDEAS

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    Cited by:

    1. Laffont, Jean-Jacques & Pouyet, Jerome, 2004. "The subsidiarity bias in regulation," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 255-283, January.
    2. Michela Redoano, 2010. "Does Centralization Affect the Number and Size of Lobbies?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(3), pages 407-435, June.
    3. Elbers, Chris & Lanjouw, Jean O. & Lanjouw, Peter, 2002. "Micro-level estimation of welfare," Policy Research Working Paper Series 2911, The World Bank.
    4. Chakraborty, Lekha S., 2006. "Fiscal decentralisation and local level gender responsive budgeting in Philippines: An empirical analysis," Working Papers 06/41, National Institute of Public Finance and Policy.
    5. Enikolopov, Ruben & Zhuravskaya, Ekaterina, 2007. "Decentralization and political institutions," Journal of Public Economics, Elsevier, vol. 91(11-12), pages 2261-2290, December.
    6. Irina Slinko & Ekaterina Zhuravskaya & Evgeny Yakovlev, 2005. "Laws for Sale: Evidence from Russia," American Law and Economics Review, Oxford University Press, vol. 7(1), pages 284-318.
    7. Martinez-Vazquez, Jorge & McNab, Robert M., 2003. "Fiscal Decentralization and Economic Growth," World Development, Elsevier, vol. 31(9), pages 1597-1616, September.
    8. Mariano Tommasi & Federico Weinschelbaum, 1999. "A Principal-Agent Building Block for the Study of Decentralization and Integration," Working Papers 20, Universidad de San Andres, Departamento de Economia, revised Nov 1999.
    9. Sebastian Eckardt, 2007. "Political Accountability, Fiscal Conditions, and Local Government Performance – Cross-Sectional Evidence from Indonesia," Working Papers 02-2007, Institute of Local Public Finance.
    10. Baleiras, Rui Nuno, 2001. "To Fragment or to Consolidate Jurisdictions: the Optimal Architecture of Government," FEUNL Working Paper Series wp401, Universidade Nova de Lisboa, Faculdade de Economia.
    11. Faguet, Jean-Paul, 2003. "Decentralization and local government in Bolivia : an overview from the bottom up," LSE Research Online Documents on Economics 481, London School of Economics and Political Science, LSE Library.
    12. Pranab Bardhan & Dilip Mookherjee, 2005. "Decentralization, Corruption and Government Accountability: An Overview," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-152, Boston University - Department of Economics.
    13. Bordignon, Massimo & Colombo, Luca & Galmarini, Umberto, 2008. "Fiscal federalism and lobbying," Journal of Public Economics, Elsevier, vol. 92(12), pages 2288-2301, December.
    14. Faguet, Jean-Paul, 2014. "Decentralization and Governance," World Development, Elsevier, vol. 53(C), pages 2-13.
    15. Fernanda Brollo, 2008. "Who Is Punishing Corrupt Politicians – Voters or the Central Government? Evidence from the Brazilian Anti-Corruption Program," Working Papers 336, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    16. Trillas, Francesc, 2010. "Electricity and telecoms reforms in the EU: Insights from the economics of federalism," Utilities Policy, Elsevier, vol. 18(2), pages 66-76, June.
    17. Santosh Mehrotra, 2006. "Governance and basic social services: ensuring accountability in service delivery through deep democratic decentralization," Journal of International Development, John Wiley & Sons, Ltd., vol. 18(2), pages 263-283.
    18. Emmanuel Botlhale, 2013. "Extending Budgetary Participation beyond Budget Pitsos in Botswana," Development Policy Review, Overseas Development Institute, vol. 31(6), pages 717-735, November.
    19. repec:foi:wpaper:2010_13 is not listed on IDEAS
    20. Claudio Agostini & Phillip Brown, 2007. "Spatial Inequality in Chile," ILADES-Georgetown University Working Papers inv178, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.
    21. Billy Jack, 2003. "Comparing the distortionary effects of alternative in-kind intergovernmental transfers," Working Papers gueconwpa~03-03-17, Georgetown University, Department of Economics.
    22. Krishna, Anirudh, 2007. "For Reducing Poverty Faster: Target Reasons Before People," World Development, Elsevier, vol. 35(11), pages 1947-1960, November.
    23. Claudio Agostini & Phillip Brown, 2007. "Desigualdad geográfica en Chile," Revista de Analisis Economico – Economic Analysis Review, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines, vol. 22(1), pages 3-33, June.
    24. Shantiko, Bayuni, 2006. "Unfinished business: customary land individualization in olilit village, tanimbar islands," MPRA Paper 918, University Library of Munich, Germany.
    25. Christian Lehmann, 2010. "Why may government transfers to the poor have modest effects on reducing rural inequality?," Working Papers halshs-00564924, HAL.

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