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Decentralisation in Africa and the Nature of Local Governments' Competition: Evidence from Benin

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  • Emilie Caldeira
  • Martial Foucault
  • Grégoire Rota-Graziosi

Abstract

Decentralization has been put forward as a powerful tool to reduce poverty and improve governance in Africa. The aim of this paper is to study the existence, and identify the nature, of spillovers resulting from local expenditure policies. These spillovers impact the efficiency of decentralization. We develop a two-jurisdiction model of public expenditure, which differs from existing literature by capturing the extreme poverty of some local governments in developing countries through a generalized notion of the Nash equilibrium, namely, the constrained Nash equilibrium. We show how and under which conditions spillovers among jurisdictions induce strategic behaviours from local officials. By estimating a spatial lag model for a panel data analysis of the 77 communes in Benin from 2002 to 2008, our empirical analysis establishes the existence of the strategic complementarity of jurisdictions' public spending. Thus, any increase in the local public provision in one jurisdiction should induce a similar variation among the neighbouring jurisdictions. This result raises the issue of coordination among local governments, and more broadly, it questions the effeciency of decentralisation in developing countries in line with Oates' theorem.

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  • Emilie Caldeira & Martial Foucault & Grégoire Rota-Graziosi, 2012. "Decentralisation in Africa and the Nature of Local Governments' Competition: Evidence from Benin," NBER Working Papers 18126, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:18126
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    Cited by:

    1. Emilie Caldeira & Martial Foucault & Grégoire Rota-Graziosi, 2014. "Does Decentralization Facilitate Access to Poverty-Related Services? Evidence from Benin," NBER Chapters, in: African Successes, Volume I: Government and Institutions, pages 57-102, National Bureau of Economic Research, Inc.
    2. George Atisa & Aziza Zemrani & Mathew Weiss, 2021. "Decentralized governments: local empowerment and sustainable development challenges in Africa," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(3), pages 3349-3367, March.
    3. Thierry Madiès & Jean-Jacques Dethier, 2012. "Fiscal Competition In Developing Countries: A Survey Of The Theoretical And Empirical Literature," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 3(02), pages 1-31.
    4. Jianhuan Huang & Jiejin Xia, 2016. "Regional Competition, Heterogeneous Factors and Pollution Intensity in China: A Spatial Econometric Analysis," Sustainability, MDPI, Open Access Journal, vol. 8(2), pages 1-26, February.
    5. Caldeira, Emilie, 2012. "Yardstick competition in a federation: Theory and evidence from China," China Economic Review, Elsevier, vol. 23(4), pages 878-897.
    6. Grégoire ROTA-GRAZIOSI & Emilie CALDEIRA, 2014. "La décentralisation dans les pays en développement : une revue de la littérature - Decentralization in developing countries: A literature review," Working Papers 201411, CERDI.
    7. International Monetary Fund, 2015. "Mali; Technical Assistance Report - Local Taxation and Decentralization," IMF Staff Country Reports 2015/291, International Monetary Fund.
    8. Groß, Lisa, 2018. "Assessing the impact of governance programmes: GIZ support to citizen participation in local governance in Benin," Discussion Papers 16/2018, German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE).
    9. Fjeldstad, Odd-Helge & Chambas, Gérard & Brun, Jean-Francois, 2014. "Local Government Taxation in Sub-Saharan Africa," Working Papers 13710, Institute of Development Studies, International Centre for Tax and Development.
    10. Shao, Shuai & Zhang, Yan & Tian, Zhihua & Li, Ding & Yang, Lili, 2020. "The regional Dutch disease effect within China: A spatial econometric investigation," Energy Economics, Elsevier, vol. 88(C).
    11. Fabiana Rocha & Veronica Orellano, 2020. "Are incentives to attract investments effective? An analysis of Brazilian municipalities," Economics Bulletin, AccessEcon, vol. 40(1), pages 534-541.
    12. Jingrong Xu & Dechun Huang & Zhengqi He & Yun Zhu, 2020. "Research on the Structural Features and Influential Factors of the Spatial Network of China’s Regional Ecological Efficiency Spillover," Sustainability, MDPI, Open Access Journal, vol. 12(8), pages 1-22, April.
    13. Frank M. Fossen & Lukas Mergele & Nicolas Pardo, 2017. "Fueling fiscal interactions: commodity price shocks and local government spending in Colombia," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(4), pages 616-651, August.
    14. repec:gam:jsusta:v:8:y:2016:i:2:p:171:d:63873 is not listed on IDEAS

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    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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