November 06, 2013 | Contribution by
Jean-Paul Faguet is a Reader in the Political Economy of Development of London School of Economics
Child at public water station, el Alto, Bolivia, 2012. Video Still: Stephan Bachenheimer / World Bank
Over the past 40 years, decentralization – that is, central governments devolving authority and resources to democratically elected sub-national governments – has been taking hold, to varying degrees, all over the world. It's considered a reform that holds the potential to improve the quality of governance. How has it performed in practice? We recently spoke with Jean-Paul Faguet – a Reader in the Political Economy of Development, London School of Economics, and Chair of the Decentralization Task Force of the Initiative for Policy Dialogue at Columbia University – about how Bolivia fared in its big bang experiment with decentralization in the mid-1990s. He says that Bolivia’s overall results were quite impressive, especially for the poor. As for how decentralization (or fiscal federalism) interacts with industrial policy, he believes that such an incentive-compatible way of limiting the power of the State and the discretion of senior politicians helps boost the odds of an industrial policy succeeding.