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

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  • Sebastian Eckardt

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.

Suggested Citation

  • 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.
  • Handle: RePEc:lpf:wpaper:02-2007
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    References listed on IDEAS

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    1. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416-416.
    2. 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.
    3. Timothy Besley & Robin Burgess, 2002. "The Political Economy of Government Responsiveness: Theory and Evidence from India," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1415-1451.
    4. Torsten Persson & Gérard Roland & Guido Tabellini, 1997. "Separation of Powers and Political Accountability," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1163-1202.
    5. 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.
    6. 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.
    7. Timothy Besley & Stephen Coate, 1997. "An Economic Model of Representative Democracy," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 85-114.
    8. 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.
    9. Seabright, Paul, 1996. "Accountability and decentralisation in government: An incomplete contracts model," European Economic Review, Elsevier, vol. 40(1), pages 61-89, January.
    10. Wildasin, David E., 1998. "Fiscal aspect of evolving federations : issues for policy and research," Policy Research Working Paper Series 1884, The World Bank.
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    More about this item

    Keywords

    governance; public services; fiscal decentralization;

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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