Decentralization and Local Government Performance : Improving Public Services Provision in Bolivia

This paper reviews some of the more important rationales for decentralization to date, examines their theoretical underpinning, and the goes on to describe the elements of a nwe theory of decentralization which might take us far in our understanding of its effectiveness and implications. Lastly and most importantly, we review a large amount of nwe data on the effects of decentralization in Bolivia. We find strong evidence that devolving resources and power to local government has (i) increased the allocative efficiency of the bolivian public sector, (ii) led to greater stability in cross-sectoral public investment patterns, (iii) led to more responsive, needs-oriented government locally than was ever achieved by the center, and (iv) very likely increased the cost-effectiveness of the public sector