The quality-access tradeoff in decentralizing public services: Evidence from education in the OECD and Spain

Susana Cordeiro Guerra and Carlos Xabel Lastra-Anadón

Journal of Comparative Economics, 2019, vol. 47, issue 2, 295-316

Abstract: Decentralized delivery of public services should enhance constituents’ ability to hold politicians accountable and improve public service outcomes, according to theory. Yet, decentralization has not consistently yielded those improvements. This paper uses a novel cross-country panel from the OECD to show that decentralization generally improves students’ access to education, but in so doing, it creates congestion effects which diminish the overall quality of education that students receive. We argue that this is partially explained by the incentives of sub-central governments upon receiving their new authority. Sub-central governments are more incentivized than national ones to pursue policy improvements that are more visible and quicker to achieve, even when they are costly – like improving access – over improvements that are less visible and take longer to achieve – like increasing quality. Decentralization should therefore result in positive effects on education access and negative on quality, consistent with our findings. We directly test the impact of political incentives on responses to decentralization by exploiting the timing of education decentralization in Spain (1980–99), and variation in the political assertiveness of regional governments, using generalized difference-in-differences and synthetic controls. As predicted, the magnitude of decentralization's effects is greater for assertive regions, which are most incentivized to prioritize high visibility, costly policies.

Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:47:y:2019:i:2:p:295-316

DOI: 10.1016/j.jce.2018.12.004

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