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Political Economy for Decentralization Reform

March 11, 2010

There is growing recognition of the need for development agency staff engaged in sectoral decentralization to comprehend better how the political-economy context can impact their efforts to improve service delivery, build institutions and achieve reductions in poverty. These findings were confirmed in the World Bank Independent Evaluation Group report on Bank Decentralization Support, 2008.

Towards helping development practitioners increase their understanding of political-economy issues, the Bank’s Public Sector Anchor and the East Asia Pacific Poverty Reduction and Economic Management (PREM) Unit, have jointly developed an analytical framework supported by country case studies, with financing from the Bank-Netherlands Partnership Program (BNPP).

The framework paper offers a systematic approach to conceptualizing and examining the motives that drive politicians to transfer resources and functions to lower levels of government and lead bureaucrats to support or oppose reform throughout the implementation process. This paper is not intended to advocate decentralization, or any particular form of it, but instead aids understanding of how political and institutional dynamics—primarily at the national and intergovernmental level—do (or could) affect decentralization reforms. The framework aims to provide input into developing more suitable and attainable service delivery and poverty reduction objectives that take into account political and institutional obstacles and opportunities.

To aid practitioners’ understanding of the broader context in which they design and implement decentralization programs, this paper points to the electoral, partisan, institutional, coalitional, and bureaucratic incentives that shape decentralization. By laying out a typology of the various impacts of decentralization and bureaucratic resistance to these, the paper shows that decentralization frequently leads to unintended consequences, including, and especially, changes in power dynamics and relationships. The paper demonstrates that systematic political-economy and institutional analysis can complement the more technical diagnostic and advisory work that is typically carried out by development agencies supporting decentralization programs.

The framework provides analytical tools to identify incentives that politicians and bureaucrats face at the various stages of decentralization and how they influence the design and implementation of the new system.  In addition, the paper examines how incentives can weaken, reinforce or shift in response to changes in political and economic conditions that arise after reform has begun. In order to test and demonstrate its utility, the framework has been applied to a set of country case studies that include Cambodia, the Democratic Republic of Congo, Peru, the Philippines, Vietnam, and Uganda.

As part of the collaborative process in developing resources to aid understanding of political-economy issues, this paper and a selection of the supporting case materials, have been presented and discussed in two workshops held with practitioners, academics, and World Bank staff working on decentralization. In these sessions, which were held in New York and Bangkok, participants considered how to improve the paper as well as increase practitioners’ understanding of how to apply a political-economy perspective when analyzing and designing processes that are intended to achieve decentralization and support local governments.

The framework paper will soon be finalized and presented at a dissemination workshop in Washington in April 2010. If you have any questions about the study or its components, please contact Mr. Kai Kaiser (kkaiser@worldbank.org) or Ms. Naazneen Barma (nbarma@worldbank.org).