Jean-Paul Faguet

Decentralization and Governance

The most important theoretical argument concerning decentralization is that it can improve governance by making government more accountable and responsive to the governed. Improving governance is also central to the motivations of real-world reformers, who bear risks and costs in the interest of devolution. But the literature has mostly focused instead on policy-relevant outcomes, such as education and health services, public investment, and fiscal deficits. This paper examines how decentralization affects governance, in particular how it might increase political competition, improve public accountability, reduce political instability, and impose incentive-compatible limits on government power, but also threaten fiscal sustainability.

Does Decentralization Increase Responsiveness to Local Needs? Evidence from Bolivia

Significant changes in public investment patterns - in both the sectoral uses of funds, and their geographic distribution - emerged after Bolivia devolved substantial resources from central agencies, to municipalities in 1994. By far the most important determinant of these changes are objective indicators of social need (for example, education investment rises where illiteracy is higher). Indicators of institutional capacity, and social organization are less important. Empirical tests using a unique database show that investment changed significantly in education, agriculture, urban development, water management, water and sanitation, and possibly health. These results are robust, and insensitive to specification. As the smallest, poorest municipalities invested newly devolved public funds in their highest priority projects, investment showed a strong, positive relationship with need in agriculture, and the social sectors. In sectors where decentralization did not bring about changes, the central government had invested little before a994, and the local government continued to invest little afterward. These findings are consistent with a model of public investment, in which local governments superior knowledge of local needs, dominates the central governments technical, and organizational advantage in the provision of public services.

Decentralisation's Effects on Public Investment: Evidence and Policy Lessons from Bolivia and Colombia

This paper examines decentralisation in Bolivia and Colombia to explore its effects on the uses and spatial distribution of public investment, as well as government responsiveness to local needs. In both countries, investment shifted from infrastructure to social services and human capital formation. Resources were rebalanced in favour of poorer districts. In Bolivia, decentralisation made government more responsive by re-directing public investment to areas of greatest need. In Colombia, municipalities increased investment significantly while running costs fell. Six important lessons emerge from the comparison. For decentralisation to work well: (i) local democracy must be transparent, fair and competitive; (ii) local governments must face hard budget constraints; (iii) central government must be scaled back; (iv) significant tax-raising powers must be devolved; and (v) decentralisation is composed of distinct, separable components, the sequencing of which is important. Finally, (vi) what decentralisation achieves, and whether it is advisable, hinges on how central government behaved pre-reform.

Decentralization and local government in Bolivia : an overview from the bottom up

Hundreds of studies have failed to establish the effects of decentralization on a number of important policy goals. This paper examines the remarkable case of Bolivia to explore decentralizations effects on government responsiveness and poverty-orientation. I first summarize econometric results on the effects of decentralization nationally, and then turn to qualitative research – the focus of the paper – that digs deep into local government processes to understand how decentralization did this. In Bolivia, decentralization made government more responsive by re-directing public investment to areas of greatest need. Investment shifted from economic production and infrastructure to social services and human capital formation, and resources were rebalanced in favor of poorer districts. I explain these results as the aggregate of discrete local institutional and political dynamics. I develop a conceptual model which construes local government as the nexus of two political markets and one organizational dynamic, where votes, money, influence and information are freely exchanged. In order for local government to be effective, these three relationships must counterbalance each other and none dominate the other. Such a stable tension leads to a self-limiting dynamic where pressures from various interest groups are contained within the bounds of political competition. Breaking this tension can hobble government, leaving it undemocratic, insensitive to economic conditions, or uninformed and unaccountable.

The Determinants of Central vs. Local Government Investment: Institutions and Politics Matter

This paper uses econometric models of public investment to investigate the institutional and political determinants of central vs. local government decision-making. I use a remarkable database from Bolivias recent, radical decentralization program. I find that local government policy decisions are progressive both economically and in terms of need, and largely determined by a competitive interest group dynamic which provides poorer citizens, as well as private sector firms and civic institutions, with political voice. This ensures that accountability is binding for elected officials. By contrast centralized investment - more insulated from grass-roots pressures - is regressive in both dimensions. The results suggest a healthy picture of local democracy in which voters are able to influence local government through both their civil institutions and the electoral mechanism. Where local government works well citizens have voice, providing an effective counterweight to the power of private firms and governments own politico-bureaucratic interests.

GOVERNANCE FROM BELOW A Theory of Local Government With Two Empirical Tests

I examine decentralization through the lens of the local dynamics that it unleashes. The national effects of decentralization are simply the sum of its local-level effects. Hence to understand decentralization we must first understand how local government works. This paper proposes a theory of local government as the confluence of two quasi-markets and one organizational dynamic. Good government results when these three elements - political, economic and civil - are in rough balance, and actors in one cannot distort the others. Specific types of imbalance map into specific forms of government failure. I use comparative analysis to test the theorys predictions with qualitative and quantitative evidence from Bolivia. The combined methodology provides a higher-order empirical rigor than either approach can alone. The theory proves robust.

Building Democracy on Quicksand: Altruism, Empire, and the United States

If the United States is intent on building an empire through military might to spread its values around the world, this political scientist believes it is bound to fail. Using institutional economics as a framework for analysis, he argues that democracies cannot be readily built unless there is a rich mosaic of social interaction already intact. Nor is the U.S. military suited to nation building.

Decentralizing for a Deeper, More Supple Democracy

We review recent evidence regarding decentralization and state strength and argue that decentralization can deepen democracy without compromising state strength if adequately designed. We examine how decentralization affects five key aspects of state strength: 1) Authority over territory and people, 2) Conflict prevention 3) Policy autonomy and the ability to uphold the law, 4) Responsive, accountable service provision, and 5) Social learning. We provide specific reform paths that should lead to strengthening in each.

Transformation from below in Bangladesh: decentralization, local governance, and systemic change

I examine decentralization through the lens of the local dynamics it unleashed in Bangladesh. I argue that the national effects of decentralization are largely the sum of its local-level effects. Hence, to understand decentralization, we must first understand how local government works. This implies analysing not only decentralization, but also democracy, from the bottom up. I present a model of local government responsiveness as the product of political openness and substantive competition. The quality of politics, in turn, emerges endogenously as a joint product of the lobbying and political engagement of local firms/interests, and the organizational density and ability of civil society. I then test these ideas using qualitative data from Bangladesh. The evidence shows that civic organizations worked with non-governmental organizations and local governments to effect transformative change from the grass roots upwards—not just to public budgets and outputs, but to the underlying behaviours and ideas that underpin social development. In the aggregate, these effects were powerful. The result, key development indicators show, is Bangladesh leap-frogging past much wealthier India between 1990 and 2015.

Low Decision Space Means No Decentralization in Fiji: Comment on "Decentralisation of Health Services in Fiji: A Decision Space Analysis"

Mohammed, North, and Ashton find that decentralization in Fiji shifted health-sector workloads from tertiary hospitals to peripheral health centres, but with little transfer of administrative authority from the centre. Decision-making in five functional areas analysed remains highly centralized. They surmise that the benefits of decentralization in terms of services and outcomes will be limited. This paper invokes Faguet’s (2012) model of local government responsiveness and accountability to explain why this is so – not only for Fiji, but in any country that decentralizes workloads but not the decision space of local governments. A competitive dynamic between economic and civic actors that interact to generate an open, competitive politics, which in turn produces accountable, responsive government can only occur where real power and resources have been devolved to local governments. Where local decision space is lacking, by contrast, decentralization is bound to fail because it has not really happened in the first place.