The Impact of Decentralization on Public Service Delivery: a Spatial Regression Discontinuity Approach

Abstract: How does decentralization impact service delivery for rural, agriculture-dependent households? Decentralization is becoming increasingly common, but its impacts have been most heavily studied in urban settings characterized by a high potential for Tiebout sorting and in countries with robust political competition. Using a spatial regression discontinuity design, we examine the impacts of fiscal and administrative decentralization in a predominantly poor, agrarian, and autocratic country: Ethiopia. This reform devolved responsibilities to the district level in half of the country's regions but not in the other half. Comparing individuals and households in rural villages along the border between regions that were and were not decentralized, we find that decentralization strongly improves public services of paramount priority to the federal government---namely agricultural extension (farmer training) and agricultural input supply. The impact on service provision in a sector that is lower priority to the central government--drinking water provision--is more mixed. Two key interpretations emerge: First, that decentralization improves public services even in the absence of conditions assumed in Tiebout-sorting and political competition models supports the information asymmetry model of decentralization. Second, in the absence of institutions providing for downward accountability to citizens, decentralization most improves services of greatest concern to the central government.