Jean-Paul Faguet
Decentralisation's Effects on Public Investment: Evidence and Policy Lessons from Bolivia and Colombia
London School of Economics and Political Science
abstract paper examines decentralisation bolivia colombia explore effects uses spatial distribution public investment well government responsiveness local needs countries investment shifted infrastructure social services human capital formation resources rebalanced favour poorer districts bolivia decentralisation made government responsive redirecting public investment areas greatest need colombia municipalities increased investment significantly running costs fell six important lessons emerge comparison decentralisation work well local democracy must transparent fair competitive ii local governments must face hard budget constraints iii central government must scaled back iv significant taxraising powers must devolved v decentralisation composed distinct separable components sequencing important finally vi decentralisation achieves whether advisable hinges central government behaved prereform acknowledgements research financed world bank research committee dfidlse crisis states programme grateful ivette arias carolina meja expert research assistance krister andersson teddy brett james dunkerley luis felipe lpez mauricio merino anja nygren two anonymous referees seminar participants cspdelhi undpmexico meetings thoughtful suggestions owe special debt gratitude collaborators decentralisation local governance violence colombia project marcela ceballos diana hoyos fabio snchez remaining errors notes 1 time mnr strategists gleefully predicted result proved wrong 2 injertos tramposos en participacin popularhoy 19 january 1994 la declaratoria de guerra del primer mandatariola razon 27 january 1994 arrogancia insultantepresencia 27 february 1994 three many articles appeared bolivian press documenting popular reaction damned law documented unidad de comunicacin 1995 3 indebted dr teddy brett apt analogy 4 indebted anonymous reviewer point 5 alesina et al citation2000 regional average 15 per cent 6 snchez et al 2000 show central transfers grew 2 per cent gdp 1990 almost 7 per cent 1997 7 frente nacional 195774 quelled la violencia sharing fruits power equally liberals conservatives restricting electoral competition two parties 8 ministry finance national secretariat public investment external finance 9 bolivia colombia local investment refers construction maintenance capital facilities equipment supplies colombia also includes salaries staff directly involved providing services bolivia contrast salaries staff selection retention remained core central government responsibilities 10 mixture including feasibility studies technical assistance emergency relief difficult categorise 11 investment sums much lower exclude central government funds 12 note xaxis reversed urban development comparability dependent variable used positive negative concept 13 central government mean investment 144876capita sd 51093capita local government mean investment 145878capita sd 79998capita 14 indebted anonymous reviewer pointing