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Decentralisation's Effects on Public Investment: Evidence and Policy Lessons from Bolivia and Colombia

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  • Jean-Paul Faguet

Abstract

This paper examines decentralisation in Bolivia and Colombia to explore its effects on the uses and spatial distribution of public investment, as well as government responsiveness to local needs. In both countries, investment shifted from infrastructure to social services and human capital formation. Resources were rebalanced in favour of poorer districts. In Bolivia, decentralisation made government more responsive by re-directing public investment to areas of greatest need. In Colombia, municipalities increased investment significantly while running costs fell. Six important lessons emerge from the comparison. For decentralisation to work well: (i) local democracy must be transparent, fair and competitive; (ii) local governments must face hard budget constraints; (iii) central government must be scaled back; (iv) significant tax-raising powers must be devolved; and (v) decentralisation is composed of distinct, separable components, the sequencing of which is important. Finally, (vi) what decentralisation achieves, and whether it is advisable, hinges on how central government behaved pre-reform.

Suggested Citation

  • Jean-Paul Faguet, 2008. "Decentralisation's Effects on Public Investment: Evidence and Policy Lessons from Bolivia and Colombia," Journal of Development Studies, Taylor & Francis Journals, vol. 44(8), pages 1100-1121.
    • Handle: RePEc:taf:jdevst:v:44:y:2008:i:8:p:1100-1121
    DOI: 10.1080/00220380802242370
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    Cited by:

    1. Resnick, Danielle, 2018. "The devolution revolution: Implications for agricultural service delivery in Ghana:," IFPRI discussion papers 1714, International Food Policy Research Institute (IFPRI).
    2. Kayode Taiwo, 2022. "Intergovernmental Transfers and Own Revenues of Subnational Governments in Nigeria," Hacienda Pública Española / Review of Public Economics, IEF, vol. 240(1), pages 31-59, March.
    3. María Orduz, 2022. "Effect of educational spending on academic performance under different institutional arrangements," Documentos CEDE 20224, Universidad de los Andes, Facultad de Economía, CEDE.
    4. Davide Luca & Andr�s Rodr�guez-Pose, 2015. "Distributive Politics and Regional Development: Assessing the Territorial Distribution of Turkey's Public Investment," Journal of Development Studies, Taylor & Francis Journals, vol. 51(11), pages 1518-1540, November.
    5. Jorge Barrientos-Marín & Juan Felipe Quintero-Vanegas & Manuela Mendoza-Jaramillo, 2020. "On the determinants of fiscal sustainability of municipalities in Colombia. The case of Antioquia, 2008-2017," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 92, pages 173-200, Enero-Jun.
    6. Anila Channa & Jean-Paul Faguet, 2016. "Decentralization of Health and Education in Developing Countries: A Quality-Adjusted Review of the Empirical Literature," The World Bank Research Observer, World Bank, vol. 31(2), pages 199-241.
    7. Batterbury, Simon P.J. & Fernando, Jude L., 2006. "Rescaling Governance and the Impacts of Political and Environmental Decentralization: An Introduction," World Development, Elsevier, vol. 34(11), pages 1851-1863, November.
    8. Lorena Viñuela, 2014. "Trends and Quality of Decentralized Public Investment," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1407, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    9. Ivo Bischoff & Ferry Prasetyia, 2015. "Determinants of local public expenditures on education: empirical evidence for Indonesian districts between 2005 and 2012," MAGKS Papers on Economics 201532, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    10. Tao Qian & Qi Zhang, 2017. "Fiscal Decentralization and Pattern of County Public Expenditures in a Chinese Province," Annals of Economics and Finance, Society for AEF, vol. 18(1), pages 201-226, May.
    11. Grävingholt, Jörn & von Haldenwang, Christian, 2016. "The promotion of decentralisation and local governance in fragile contexts," IDOS Discussion Papers 20/2016, German Institute of Development and Sustainability (IDOS).
    12. Seregious Be-ere, 2022. "Decentralization Reforms in Developing Countries Designed to Champion the Interests of Central Politicians and not Grassroots Development," Journal of Developing Societies, , vol. 38(1), pages 27-49, March.
    13. Dufhues, Thomas & Theesfeld, Insa & Buchenrieder, Gertrud & Munkung, Nuchanata, 2011. "The Political Economy of Decentralization in Thailand - Does Decentralization Allow for Peasant Participation?," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114428, European Association of Agricultural Economists.

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