The Political and Economic Consequences of Decentralization

Abstract

The political and economic consequences of decentralization Decentralization has become one of the most important forms of contemporary policy reform and institutional redesign in the last several decades. It is not difficult to find empirical evidence supporting this claim. A recent survey finds that sixtythree of seventy-five developing countries have been undergoing some decentralization of authority (Garman et al, 2001, page 205). Moreover, an index of regional authority in forty-two democracies and semidemocracies reveals that twenty-nine countries have regionalized and only two have become more centralized since 1950 (Hooghe et al, 2010). In addition, around half the member states of the European Union have carried out significant decentralization and regionalization reforms since the 1980s, while none has become more centralized (Hooghe and Marks, 2001). These have not been surprising trends when viewed in the broader contexts of governments all around the world pursuing, in the past half century, greater economic efficiency in the public sector and stronger grassroots democratic institutions and representation for their citizens. However, as usual in the social sciences, the relationship between cause (decentralization) and effects (improved government efficiency, better governance, and so on) is not so simple. The decentralization processes also have consequences, often unintended, for a wide range of political and economic issues such as corruption, party systems, and turnout, on the one hand, and poverty and inequality, long-run macroeconomic performance, the development of social capital, and effectiveness of tax assignment, on the other. The papers in this issue are intended to shed light on and advance our understanding about some of these questions. Let us examine them. The debate on the impact of political institutions, particularly the territorial sovereignty (unitary or federal), on governance remains unresolved. The mechanisms behind a positive relationship between decentralization and governance might be compensated to some extent by other mechanisms playing in the opposite direction. Multilevel institutions create new opportunities for local actors, improve the quality of public policy, and reduce administrative costs by increasing the proximity between government and citizen as well as governmental understanding of citizen preferences [among others, see Escobar-Lemmon (2003) and Weingast (1995)]. However, if the electoral control of incumbents falters as a result of an inability to assign responsibility in multilevel governance, politicians are no longer forced to act in the best interest of the public (Anderson, 2006; Lago-Pen¬ as and Lago-Pen¬ as, 2010). Clarity of responsibility might be then a key challenge for the success of decentralization processes. According to Gerring and Thacker (2004), Kunicova¨and Rose-Ackerman (2005), or Treisman (2000), for instance, unitary polities experience lower levels of corruption because of, among other things, the more hierarchical arrangement of poli...

On the Determinants of Local Government Debt: Does One Size Fit All?

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Political dynamics of local government reform in a development context: The case of Turkey

“…One aspect of this new system of governance was the increasing significance of the political, economic, and administrative role of local governments, which began to usurp some of the prerogatives of central administrations in many areas including infrastructure, social policy, and education. Due to this decentralisation, the subnational shares of revenues and expenditures increased in both advanced capitalist and late industrialising countries (Bardhan and Mookherje, 2006;Brosio and Jimenez, 2012;Dollery et al, 2008;Falleti, 2010;Lago-Peñas et al, 2011;Rodriguez-Pose and Gill, 2003;Smoke et al, 2006).…”

Harnessing the Economic Potential of ‘Second-Tier’ European Cities: Lessons from Four Different State/Urban Systems

“…The preceding discussion about second-tier cities has implications for longstanding debates concerned with optimal spatial policies, settlement structures, degrees of deconcentration and decentralisation, and maximisation of urban and national economic performance (Lago-Peñas et al, 2011;Pike et al, 2012;Tomaney et al, 2011;Zimmerman, 2010).…”