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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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    References listed on IDEAS

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    Citations

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    Cited by:

    1. 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.
    2. 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.
    3. International Monetary Fund, 2015. "Mali; Technical Assistance Report - Local Taxation and Decentralization," IMF Staff Country Reports 15/291, International Monetary Fund.
    4. repec:wsi:jicepx:v:03:y:2012:i:02:n:s1793993312500135 is not listed on IDEAS
    5. 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.
    6. Caldeira, Emilie, 2012. "Yardstick competition in a federation: Theory and evidence from China," China Economic Review, Elsevier, vol. 23(4), pages 878-897.
    7. repec:kap:itaxpf:v:24:y:2017:i:4:d:10.1007_s10797-017-9461-4 is not listed on IDEAS
    8. repec:gam:jsusta:v:8:y:2016:i:2:p:171:d:63873 is not listed on IDEAS

    More about this item

    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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