London School of Economics EOPP: Economic Organisation and Public Policy Programme LSE
EOPP: Economic Organisation and Public Policy Programme

Abstract for:

GOVERNANCE FROM BELOW A Theory of Local Government With Two Empirical Tests

Jean-Paul Faguet, August 2005
Paper No' PEPP 12: | Full paper (pdf)
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Keywords: local government; civil society, democratic theory, good governance, decentralization, Q2 (Q-square), Bolivia

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

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Abstract:

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.