Based on Working Paper No. 29: Jean-Paul Faguet, 'Decentralization and Local Government in Bolivia: An overview from the bottom up'. It is intended to provide a summary of the principal findings, and an indication of the implications these may have for debates over policy.
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 decentralization's effects on government responsiveness and poverty-orientation. It begins by summarizing the econometric results on the effects of decentralization nationally, and then turns to qualitative research 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 favour of poorer districts. These results are explained as the aggregate of discrete local institutional and political dynamics. A conceptual model is developed 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.
Briefing Paper No.12. Decentralization and Local Government, 2003, London, UK; Crisis States Research Centre, 2 pp.