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Decentralization Task Force Meeting, New York City 2006

February 16, 2006

Columbia University   New York City, New York, United States

Decentralization is on the policy agenda all over the world. Although real experiments are under way in scores of countries and literally hundreds of empirical studies have been conducted, the economic and political effects of decentralization are still unclear. Furthermore, the key determinants that differentiate successful from unsuccessful decentralization strategies are largely unknown. The fact that many countries are still involved in some form of decentralization programs gives rise to the concern that these are "shots in the dark."

At their second meeting on February 16-17, 2006 at Columbia University, the task force isolated the sources of disagreement among competing perspectives and used case studies to illustrate the impact of decentralization programs. The stated goal was to develop a comprehensive catalogue of policy analysis useful to policymakers and civil society. The task force also met to present new research and papers for critique and to discuss the most recent draft of the task force overview report.

  • Pranab K. Bardhan
    Task Force Member
    Professor of Economics
    University of California, Berkeley
  • Tim Besley
    Task Force Member
    Kuwait Professor of Economics and Political Science
    London School of Economics
  • Ali Cheema
    Task Force Member
    Head of Economics Department
    Lahore University of Management Sciences
  • Jean-Paul Faguet
    Task Force Chair
    London School of Economics
  • Francisco H.G. Ferreira
    Task Force Member
    Economics Research
    The World Bank
  • Juan Pablo Jimenez
    Task Force Member
    Economic Affairs Officer
    Economic Commission for Latin America and the Caribbean (ECLAC-UN)
  • Stuti Khemani
    Task Force Member
    Economist, Development Research Group (Public Services Team)
    World Bank
  • Asim Khwaja
    Task Force Member
    Assistant Professor of Public Policy
    Harvard University
  • Dilip Mookherjee
    Task Force Member
    Professor of Economics
    Boston University
  • Daniel Treisman
    Task Force Member
  • Renato Villela
    Task Force Member
    Deputy Secretary of Finance
    The State of Rio de Janeiro
  • Federico Weinschelbaum
    Task Force Member
    Associate Professor
    Department of Economics
    Universidad de San Andres
Local Inequality and Project Choice in a Social Investment Fund

205kb pdf
Francisco H.G. Ferreira,
Maria Caridad Araujo,
Peter Frederick Lanjouw,
Berk Ozler

Despite numerous evaluations of Social Investment Funds in various countries around the world, quantitative evidence on the local determinants of project choice remains scant. In this paper, exploiting a unique combination of data sets from Ecuador, we test a simple model of project choice in the presence of local inequalities in influence. Consistent with the predictions of our model, we find that communities with higher levels of estimated (consumption) inequality are less likely to receive any projects from Ecuador’s Social Investment Funds (FISE) and, conditional on receiving a project, less likely to have projects that provide excludable goods for the poor, such as latrines. Controlling for inequality, poorer villages are more likely to receive excludable pro-poor projects and projects that require no counterpart funding. The results are sensitive to the measure of inequality used in the empirical analysis, and are strongest for the income share of the elite. Finally, we find that the poverty headcount, population size, and the level of political support for the incumbent party at the local level are also important determinants of project choice. The findings indicate that information on local inequality can be of potential value to the design of decentralized mechanisms of project delivery.

Panchayati Raj and Poverty Alleviation in West Bengal: Summary of Research Findings

57kb pdf
Pranab K. Bardhan,
Dilip Mookherjee

Political Decentralization and Policy Experimentation

147kb pdf
Daniel Treisman,
Hongbin Cai

Since Justice Brandeis’ 1932 remark that in a federal system states can serve as “laboratories” of democracy, a widespread belief has held that political decentralization stimulates policy experimentation. We reexamine the political economy underlying this claim, using a model of retrospective voting and contrasting centralized and decentralized institutions. Although under some conditions (when experiments are politically promising) decentralization can result in greater experimentation, several effects combine to lead, under most conditions, to both more frequent and better organized policy experimentation under centralized government.

Bringing Electoral Politics to the Doorstep: Who Gains Who Loses?

287kb pdf
Ali Cheema,
Shandana Khan Mohmand

This paper uses household survey data from Punjab Pakistan to empirically analyze who is gaining and who is losing as a result of recent reforms that have instituted electoral decentralization and expenditure devolution. The identification strategy relies on exogenous kinship or caste identities and historic settlement patterns of households to estimate the change in the post-reform bias of service provision outcomes between different household types. We find that electoral and expenditure decentralization in Pakistan has had the positive effect that households in previously underprovided villages have seen a substantial increase in the provision of essential services. However, the results also show that post-reform targeting of provision between households is conditional upon political geography and membership to dominant village level patron-client factions. The results show that being a demographic majority does not always count in a decentralized structure and that there are incentives in the system that may lead politicians to discount groups that are in a demographic majority.

Decentralization’s Effects on Educational Outcomes in Bolivia and Colombia

290kb pdf
Jean-Paul Faguet,
Fabio Sanchez Torres

The effects of decentralization on public sector outputs is much debated but little agreed upon. This paper compares the remarkable case of Bolivia with the more complex case of Colombia to explore decentralization’s effects on public education outcomes. In Colombia, decentralization of education finance improved enrollment rates in public schools. In Bolivia, decentralization made government more responsive by re-directing public investment to areas of greatest need. In both countries, investment shifted from infrastructure to primary social services. In both, the behavior of the smallest, poorest, most rural municipalities was what drove these changes.

Can Delegation Promote Fiscal Discipline in a Federation? Evidence from Fiscal Performance in the Indian States

181kb pdf
Stuti Khemani

Theoretical and empirical analysis suggests that federations are prone to fiscal indiscipline, because of a classic “common-pool” problem of distributive politics—when decision-making power over government spending is distributed across multiple agents but financed out of generalized taxation. An institutional solution typically adopted by many countries is the delegation of sub-national debt oversight to the national political executive, which is assumed to have stronger incentives for fiscal discipline. Can such delegation successfully address political distortions to fiscal discipline? This paper provides evidence on this question from India, arguing that such delegation has limited success because the political incentives of the national government are such that it is unwilling or unable to enforce hard budget constraints on sub-nationals. In light of this evidence, the paper explores the role of an alternate form of delegation, to an independent fiscal agency, of monitoring and oversight of consolidated government debt, as a solution to the common- pool problem, again providing evidence from India to support its arguments.

Synoptic Guide to Decentralization

255kb pdf

Event Information

Type Meeting
Program Decentralization