PhD Defense: Muhammad Adil

Essays on the Political Economy of Decentralization

Jury

Grégoire Rota-Graziosi, Professor, Université Clermont Auvergne
Florent Bresson, Associate Professor, Université Clermont Auvergne
Sonia Paty, Professor, Université Lyon II
Thierry Madies, Professor, Université de Fribourg

Abstract

This thesis consists of three chapters, which address different questions about the political economy of decentralization. In the first paper (Chapter 1), I study how Pakistan undertook decentralization reforms at different times and see how those reforms improved the country's overall social and economic services delivery. I report the results from an input (per capita sectoral expenditures) and an output (sectoral outcomes) approach. I leverage the use of sectoral spending with the decentralization reforms. The evidence shows reforms have had a short-run positive effect in increasing the delivery of some of the services but have failed in the long run. The results highlight certain loopholes in the policy design and implementation.

Furthermore, the lack of political will to share authority with subnational governments and the failure of equitable resource distribution among federal units and the central government are other specific reasons for the non-delivery of expected outcomes from the reforms. The reforms have been an important ingredient for military rulers to legitimize their unlawful takeover of the civilian governments. For the elected governments, decentralization reforms have been a way forward to ease regional tensions (among and between provinces and the central government) over regional autonomy and resource distribution. Hence, the reforms undertaken in the country have often aimed at anything but improving quality of life and delivering services to poor masses. However, the reforms enable sub-national governments to make specific decisions on local public services delivery.

Based on the evidence from the analysis in this paper, I infer that the decentralization reforms will plausibly succeed if they promote regional economic growth and development with more authority to provincial governments on taxation and revenue generation. Moreover, regional governments' lack of political and financial management capacity are other critical points for improvement. If appropriately designed and implemented equitably, the policy reforms can improve regional governments' capacity to add more to national economic growth. Furthermore, the local governments need to be seen as an auxiliary to higher tiers and not competitors. This shift in the paradigm in the relationship between higher and lower tiers of the governments will surely add to the potential benefits from the decentralization reforms in Pakistan.

The second paper (Chapter 2) provides evidence on decentralization and its effects on reducing regional disparities in Asia. The paper focuses on predicting how political and fiscal decentralization measures complement one another in affecting regional disparities. As a source of identification, this paper uses a range of fiscal and political decentralization indicators. For the regional income inequalities, I identify the coefficient of variation of regional GDP per capita as an outcome variable. This allows for a comparative analysis of inequalities among regions within a country. To further add to the results, I use the Gini index from the World Bank as an alternate outcome variable. The use of the Gini index allows for a comparison of income differences among countries. I take an opportunity to test the relationship in an individual and combined set-up with the decentralization indicators.

The evidence shows that fiscal decentralization has harmed regional inequalities (increase in regional disparities). The lack of fiscal autonomy and limit to decide on taxation and revenues hinders sub-national governments’ scope for the provision of services demanded by the local population. This induces regional inequalities to widen because more public services delivery targeted to the welfare of people and raising standards of living becomes difficult.

The political decentralization measures portray a mixed effect in this regard. The authority on the political front is limited in many countries. This affects regional inequalities to reduce only partially. The partial effects further help in digging deep into the matters. The policies aim to empower subnational governments on political and fiscal dimensions. Nevertheless, these reforms have not been entirely successful in reducing regional income disparities in these countries.

The third paper (Chapter 3) takes a historical perspective and studies the colonial economic history in British Indian Punjab. The decentralized services delivery in the districts of colonial Punjab as a function of state capacity (financial capacity) is a significant focus in this chapter. The colonial districts were constrained with the availability of economic and institutional capacity; the colonial government made fewer efforts to uplift people's welfare. I use per acre of land revenues to measure state capacity and analyze how the financial availability through agriculture taxation affected the health and education services delivery. I leverage the use of census year data for the analysis. Guided by the results of linear models, I find that the state capacity had positive effects on health and education outcomes. The literacy rates and the reduction of mortality rates were somewhat observable in the initial years of the study. However, these effects diminished over time. In addition to the financial State capacity, I include infrastructural development as a secondary influencing agent in the analysis.

The British Indian railroad project was one of the most significant railway network projects of history. The effects of transportation infrastructure development worked as a catalyst for changing the dynamics of agriculture extension. The effects were prominent for Punjab. The agriculture production was motivated by the availability of railway transportation for trade. The price volatilities reduced, and the famine hit districts received food grains quickly to mitigate the adverse effects. This improved health and economic well-being of the people. The demand for education and health facilities equally raised. The railway infrastructure was influential on health and education outcomes. Nevertheless, the effects reduced over time, and the impact of this vast infrastructure development had lower influences on increasing literacy rates and reducing mortality rates in the districts of Punjab.

Keywords

Political and fiscal decentralization, services deliver, literacy, mortality, health, education, state capacity, railways, regional inequality, Gini index, agriculture tax, colonial policies, Punjab, Pakistan, Asia.