DHB Decentralization and Local Public Goods: How Does Allocation of Decision-making Authority Affect Provision?

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DHB Decentralization and Local Public Goods: How Does Allocation of Decision-making Authority Affect Provision?

by Malgosia Madajewicz

Access to services such as safe drinking water, sanitation, health care and education remains inadequate for much of the world's population. Decentralization is one policy idea whose effectiveness in improving the provision of services is hotly debated in academic and policy literatures. The World Bank and other policy makers maintain that communities who use the services should be involved in providing them. However, what community participation means and the way in which it is implemented vary widely. The policy lacks a theoretical foundation and evidence regarding its performance.

The proposed project will combine theory and empirical work to study how social dynamics influence the outcome attained by different ways of organizing the provision of local public goods, a category which includes social services. The objective is to categorize conditions under which decentralization, i.e. delegation of decision-making authority to the local level, improves outcomes. The researchers will use a dynamic, stochastic model of behavior by heterogeneous agents in order to determine to whom decision-making authority should be assigned in order to maximize social welfare. They will also examine the difference in outcomes between two extreme models of delegation, full centralization and full decision-making by the community which will be using the public good. They will study how the welfare-maximizing allocation of decision-making and outcomes in the two extreme cases depend on the social networks among agents, the distribution of wealth, and the number of participants.

The research team will also conduct an organizational experiment in order to test and refine the theory. They will collaborate with private, non-profit organizations (NGOs) in Bangladesh, BRAC and EPRC, who are working to supply safe drinking water in response to the problem of unsafe levels of arsenic in the groundwater. BRAC is the largest and one of the most influential NGOs in the world. The team will randomly assign three types of village-level interventions, which correspond to types of delegation studied in the theoretical model, to help villages provide safe water. They will collect household-level data to document outcomes in these villages and in a control group of villages in which no intervention occurred.