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Abstract:

Political Economy and Public Policy Paper
GOVERNANCE FROM BELOW A Theory of Local Government With Two Empirical Tests
Jean-Paul Faguet
August 2005
Paper No' PEPP 12:
Full Paper (pdf)

JEL Classification: D71; H41; H42; H72; O18


Tags: local government; civil society; democratic theory; good governance; decentralization; q2 (q-square); bolivia

I examine decentralization through the lens of the local dynamics that it unleashes. The national effects of decentralization are simply the sum of its local-level effects. Hence to understand decentralization we must first understand how local government works. This paper proposes a theory of local government as the confluence of two quasi-markets and one organizational dynamic. Good government results when these three elements – political, economic and civil – are in rough balance, and actors in one cannot distort the others. Specific types of imbalance map into specific forms of government failure. I use comparative analysis to test the theory’s predictions with qualitative and quantitative evidence from Bolivia. The combined methodology provides a higher-order empirical rigor than either approach can alone. The theory proves robust.