Shared Mandates, Moral Hazard, and Political (Mis)alignment in a Decentralized Economy

Antonio Estache, Grégoire Garsous () and Ronaldo Seroa da Motta

No 6882, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: This paper investigates the effects of political (mis)alignment on public service delivery when mandates are shared between state and local governments. We analyze sewage treatment policies in the state of SaÞo Paulo, Brazil. Relying on difference-in-differences estimations, we establish a causal relationship between political alignment and higher sewage treatment provision. Conceptually, we find that, with uncertain local commitment and weakly enforceable local obligations, shared mandates lead to a moral hazard issue implying service under-provision. Our results show that political alignment attenuates such moral hazard effects.

Keywords: Infrastructure provision; Water and sanitary services; Moral; Political alignment (search for similar items in EconPapers)
JEL-codes: H40 H54 H72 P48 (search for similar items in EconPapers)
Date: 2015-03
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Related works:
Journal Article: Shared Mandates, Moral Hazard, and Political (Mis)alignment in a Decentralized Economy (2016)
Working Paper: Shared Mandates, Moral Hazard and Political (Mis)alignment in a Decentralized Economy (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:6882

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