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Rethinking the political economy of decentralization: how elections and parties shape the provision of local public goods

Listed author(s):
  • Raúl A. Ponce-Rodríguez
  • Charles R. Hankla
  • Jorge Martinez-Vazquez
  • Eunice Heredia-Ortiz

As more and more of the world’s states devolve power and resources to sub-national governments, decentralization has emerged as one of the most important global trends of the new century. Yet there is still no consensus concerning the benefits of decentralization and how to design institutions that can realize these benefits. In this paper, we investigate the political conditions under which the decentralization of authority will improve the delivery of public goods. Building off Oates’ “decentralization theorem” to include inter-jurisdictional spillovers, we develop a new theory suggesting that the interaction of democratic decentralization (the popular election of sub-national governments) and party centralization (the power of national party leaders over sub-national office-seekers) will produce the best service delivery outcomes. To test this argument empirically, we develop a new dataset of sub-national political institutions. Our analyses, which examine educational and health service delivery in 135 countries across 30 years, provide support for our theoretical expectations.

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File URL: http://infogen.webs.uvigo.es/WP/WP1603.pdf
File Function: First version, 2016
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Paper provided by Universidade de Vigo, GEN - Governance and Economics research Network in its series Working Papers. Collection A: Public economics, governance and decentralization with number 1603.

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Length: 46 pages
Date of creation: Apr 2016
Handle: RePEc:gov:wpaper:1603
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  1. Jorge Martinez-Vazquez & Santiago Lago-Peñas & Agnese Sacchi, 2015. "The Impact of Fiscal Decentralization: A Survey," Working papers 29, Società Italiana di Economia Pubblica.
  2. Malesky, Edmund J. & Nguyen, Cuong Viet & Tran, Anh, 2014. "The Impact of Recentralization on Public Services: A Difference-in-Differences Analysis of the Abolition of Elected Councils in Vietnam," American Political Science Review, Cambridge University Press, vol. 108(01), pages 144-168, February.
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  6. Myerson, Roger B., 2006. "Federalism and Incentives for Success of Democracy," Quarterly Journal of Political Science, now publishers, vol. 1(1), pages 3-23, January.
  7. Faguet, Jean-Paul & Sánchez, Fabio, 2008. "Decentralization's Effects on Educational Outcomes in Bolivia and Colombia," World Development, Elsevier, vol. 36(7), pages 1294-1316, July.
  8. Davoodi, Hamid & Zou, Heng-fu, 1998. "Fiscal Decentralization and Economic Growth: A Cross-Country Study," Journal of Urban Economics, Elsevier, vol. 43(2), pages 244-257, March.
  9. Charles R. Hankla, 2009. "When is Fiscal Decentralization Good for Governance?," Publius: The Journal of Federalism, Oxford University Press, vol. 39(4), pages 632-650, Fall.
  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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  12. Zhang, Tao & Zou, Heng-fu, 1998. "Fiscal decentralization, public spending, and economic growth in China," Journal of Public Economics, Elsevier, vol. 67(2), pages 221-240, February.
  13. Floriana Cerniglia & Riccarda Longaretti, 2013. "Federalism, education-related public good and growth when agents are heterogeneous," Journal of Economics, Springer, vol. 109(3), pages 271-301, July.
  14. Parry, Taryn Rounds, 1997. "Achieving balance in decentralization: A case study of education decentralization in Chile," World Development, Elsevier, vol. 25(2), pages 211-225, February.
  15. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416-416.
  16. 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.
  17. Besley, Timothy & Coate, Stephen, 2003. "Centralized versus decentralized provision of local public goods: a political economy approach," Journal of Public Economics, Elsevier, vol. 87(12), pages 2611-2637, December.
  18. Pranab Bardhan, 2002. "Decentralization of Governance and Development," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 185-205, Fall.
  19. Arze del Granado, F. Javier & Martinez-Vazquez, Jorge & McNab, Robert M., 2012. "Decentralized Governance and Preferences for Public Goods," MPRA Paper 42459, University Library of Munich, Germany.
  20. World Bank, 2010. "World Development Indicators 2010," World Bank Publications, The World Bank, number 4373, April.
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