The Added Value of Local Democracy: Evidence from a Natural Experiment in India

Governments across the world have increasingly devolved powers to locally elected leaders. This paper studies the consequences of local democracy, exploiting a natural experiment in Karnataka, India. Local elections were postponed in 2020, resulting in appointed administrators taking over governance in villages whose elected leaders completed their terms that year. This created quasi-random variation in the governance regime across villages. The paper brings together a rich set of administrative datasets—budgetary allocations from the universe of 6,000 villages, more than a million public works projects, local bureaucratic attendance, welfare benefits, and a primary survey of more than 11,810 households—to estimate the impacts of local democracy. The findings show that local democracy aligns spending more closely with citizen preferences, but these gains accrue more to men, upper castes, and other advantaged social groups. Elected leaders are more responsive to citizen needs and cause local bureaucrats to exert more effort. However, appointed administrators perform better on aspects of governance that are aligned with their specialized skills. Local democracy improves governance in some domains, but it has no overall impact on economic outcomes or effectiveness of COVID-19 management.