Does Decentralization Increase Government Responsiveness to Local Needs? Evidence from Bolivia

38 Pages Posted: 16 Feb 2001

See all articles by Jean-Paul Faguet

Jean-Paul Faguet

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP)

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Date Written: August 28, 2002

Abstract

This paper examines whether decentralization increases the responsiveness of public investment to local needs using a unique database from Bolivia. Empirical tests show that investment patterns in human capital and social services changed significantly after decentralization. These changes are strongly and positively related to objective indicators of need. Nationally, these changes were driven by the smallest, poorest municipalities investing devolved funds in their highest-priority projects. The findings contradict common claims that local government is too corrupt, institutionally weak, or prone to interest-group capture to improve upon central government's allocation of public resources.

Keywords: decentralization, local government, participation, targeting, Bolivia

JEL Classification: D72, D73, H41, H42, H72, O18

Suggested Citation

Faguet, Jean-Paul, Does Decentralization Increase Government Responsiveness to Local Needs? Evidence from Bolivia (August 28, 2002). Available at SSRN: https://ssrn.com/abstract=260579 or http://dx.doi.org/10.2139/ssrn.260579

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