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Relative Capture of Local and Central Governments: An Essay in the Political Economy of Decentralization

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  • Bardhan, Pranab
  • Mookherjee, Dilip

Abstract

A common presumption is that decentralization is prone to a potential pitfall owing to the greater vulnerability of local governments to capture by local elites. We investigate the determinants of relative capture of local and national governments theoretically, in the context of an extended version of the Baron-Grossman-Helpman model of electoral competition with lobbying by special interest groups. A number of factors do provide support to the traditional presumption, such as reduced cohesiveness of interest groups, higher levels of voter awareness, and greater electoral competition at the national level. A number of other factors may, however, create an opposite tendency for lower capture at the local level. These include less electoral uncertainty at the national level, and a higher value of campaign funds in national elections owing to their fungibility across different districts. Relative capture also depends on heterogeneity across districts with respect to levels of local inequality and poverty: accordingly decentralization will tend to increase capture in high inequality districts and lower it in low inequality districts. Power-sharing between parties at the national level, due either to coalition governments or proportional representation, limits the extent of national capture. We conclude that empirical research is necessary to investigate the extent and determinants of relative capture.

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  • Bardhan, Pranab & Mookherjee, Dilip, 2002. "Relative Capture of Local and Central Governments: An Essay in the Political Economy of Decentralization," Department of Economics, Working Paper Series qt9gx7t5hd, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  • Handle: RePEc:cdl:econwp:qt9gx7t5hd
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    4. Regina Birner & Heidi Wittmer, 2004. "On the ‘Efficient Boundaries of the State’: The Contribution of Transaction-Costs Economics to the Analysis of Decentralization and Devolution in Natural Resource Management," Environment and Planning C, , vol. 22(5), pages 667-685, October.
    5. Ariane Lambert-Mogiliansky & Konstantin Sonin & Ekaterina Zhuravskaya, 2003. "Capture of Bankruptcy: Theory and Russian Evidence," Working Papers w0038, New Economic School (NES).
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    7. Henning, Christian H. C. A. & Diaz, Daniel & Petri, Svetlana, 2020. "Voting vs. non-voting in Senegal: A nested multinomial logit model approach," Working Papers of Agricultural Policy WP2020-12, University of Kiel, Department of Agricultural Economics, Chair of Agricultural Policy.
    8. Henning, Christian H. C. A. & Diaz, Daniel & Lendewig, Andrea, 2018. "Voter behavior and government performance: Empirical application in Ghana," Working Papers of Agricultural Policy WP2018-04, University of Kiel, Department of Agricultural Economics, Chair of Agricultural Policy.
    9. Henning, Christian H.C.A. & Zarnekow, Nana & Petri, Svetlana & Albrecht, Ernst & Hedtrich, Johannes, 2013. "Public Evaluation and Political Acceptance of Sustainable Land Use Polices: A populist democracy policy failure?," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150494, Agricultural and Applied Economics Association.
    10. Abmann, Christian & Henning, Christian H.C.A. & Krampe, Eva, 2012. "Constitutional Rules, Informal Institutions and Agricultural Protection in Developing and Industrial Countries: Theory and Empirical Evidence," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124885, Agricultural and Applied Economics Association.
    11. Henning, Christian H. C. A. & Diaz, Daniel & Lendewig, Andrea & Petri, Svetlana, 2020. "How important are abstainers in presidential elections? A comparative analysis between Africa and Latin America," Working Papers of Agricultural Policy WP2020-13, University of Kiel, Department of Agricultural Economics, Chair of Agricultural Policy.
    12. Manzoor Ahmed, 2023. "Political Economy of Elite Capture and Clientelism in Public Resource Distribution: Theory and Evidence from Balochistan, Pakistan," India Quarterly: A Journal of International Affairs, , vol. 79(2), pages 223-243, June.
    13. Bordignon, Massimo & Colombo, Luca & Galmarini, Umberto, 2008. "Fiscal federalism and lobbying," Journal of Public Economics, Elsevier, vol. 92(12), pages 2288-2301, December.
    14. Henning, Christian H. C. A., 2015. "Modeling and evaluation of political processes: A new quantitative approach," Working Papers of Agricultural Policy WP2015-01, University of Kiel, Department of Agricultural Economics, Chair of Agricultural Policy.
    15. Christian Lehmann, 2010. "Why may government transfers to the poor have modest effects on reducing rural inequality?," Working Papers halshs-00564924, HAL.

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