Decentralisation in Africa and the Nature of Local Governments' Competition: Evidence from Benin

Emilie Caldeira, Martial Foucault () and Grégoire Rota-Graziosi
Authors registered in the RePEc Author Service: Grégoire ROTA GRAZIOSI

No 18126, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Decentralization has been put forward as a powerful tool to reduce poverty and improve governance in Africa. The aim of this paper is to study the existence, and identify the nature, of spillovers resulting from local expenditure policies. These spillovers impact the efficiency of decentralization. We develop a two-jurisdiction model of public expenditure, which differs from existing literature by capturing the extreme poverty of some local governments in developing countries through a generalized notion of the Nash equilibrium, namely, the constrained Nash equilibrium. We show how and under which conditions spillovers among jurisdictions induce strategic behaviours from local officials. By estimating a spatial lag model for a panel data analysis of the 77 communes in Benin from 2002 to 2008, our empirical analysis establishes the existence of the strategic complementarity of jurisdictions' public spending. Thus, any increase in the local public provision in one jurisdiction should induce a similar variation among the neighbouring jurisdictions. This result raises the issue of coordination among local governments, and more broadly, it questions the effeciency of decentralisation in developing countries in line with Oates' theorem.

JEL-codes: D72 H2 H7 (search for similar items in EconPapers)
Date: 2012-06
New Economics Papers: this item is included in nep-afr and nep-ure
Note: PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Published as Emilie Caldeira & Martial Foucault & Gregoire Rota-Graziosi, 2015. "Decentralization in Africa and the nature of local governments’ competition: evidence from Benin," International Tax and Public Finance, Springer, vol. 22(6), pages 1048-1076, December.

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Related works:
Journal Article: Decentralization in Africa and the nature of local governments’ competition: evidence from Benin (2015)
Working Paper: Decentralisation in Africa and the Nature of Local Governments' Competition: Evidence from Benin (2012)
Working Paper: Decentralization in Africa and the nature of local governments' competition: evidence from Benin (2011)
Working Paper: Decentralization in Africa and the nature of local governments' competition: evidence from Benin (2010)
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