Interacting Capacities: The Indirect National Contribution to Subnational Service Provision

Different levels of government often interact on the ground, providing closely related services. While multilevel governance arrangements have been studied broadly, scarce literature has explored the contribution of national governments to achieving subnational policy goals. By reconceptualizing administrative decentralization as coexisting devolution (to subnational governments) and deconcentration (through field units), this research explores the indirect national contribution to subnational performance by delivering associated services. This article tests the following hypotheses: (1) there is a positive effect of national deconcentrated capacity on subnational policy outputs, and (2) under policy overlap, this contribution diminishes with increasing levels of subnational capacity. While Colombian schooling is decentralized, the national government indirectly contributes to education through a national agency that administers child protection services. Analyzing data for Colombian subnational governments over a decade reveals that national capacity boosts education provision while the least endowed regions benefit the most, thus providing evidence supporting both hypotheses.     

Paths and Constraints of Subnational Government Mobilization in East-Central Europe

The article studies the impact of enlargement on subnational governments in the Czech Republic, Hungary, and Poland. It compares the resources and political constellations of subnational governments and analyses how these variables interact with Europeanization to influence domestic intergovernmental relations, the management of structural funds and the European Union relations of subnational governments. The article argues that stronger regional governments (in Poland and the Czech Republic) have been able to resist attempts to centralize intergovernmental relations. Decentralizing reforms occurred where incumbent governing parties dominated subnational government (Poland). Under ‘vertically divided’ government (Czech Republic), subnational governments sought unmediated access to European Union institutions.     

Redistributive policies in decentralised systems: The effect of decentralisation on subnational social spending

This article uses cross‐national data to examine the effects of fiscal and political decentralisation on subnational governments’ social expenditures. It revisits the benefit competition hypothesis put forward by fiscal federalism research, which posits that subnational governments in decentralised countries match welfare benefit reductions by their peers to keep taxes low and avoid an in‐migration of welfare dependents. As a consequence, subnational social expenditures are assumed to plateau at similar and low levels. Using a new cross‐national dataset on social expenditures in 334 subnational units across 14 countries and 21 years, the author explores whether benefit competition causes subnational governments to converge on similar levels of social spending. The analysis reveals that as countries decentralise, subnational social spending levels begin to diverge rather than converge, with some subnational governments reducing their social expenditures and others increasing them. Furthermore, decentralisation is not likely to be associated with lowest common denominator social policies, but with more variability in social expenditure. The article also examines the effects of other macro‐level institutions and demonstrates that policy coordination influences the relationship between decentralisation and subnational social spending levels.     

Central-Local Government Relations in Transition: The Case of Swedish Child Care

The provision of subsidized child care has grown to become asizeable economic activity in Sweden during recent decades.This paper examines the changed financial relation betweencentral and local governments and the impact of child-caregrants on local government behaviour. We find that during anearlier regime, with a system of matching grants, localgovernments responded strongly to the incentives of the rules.This resulted in both intended and unintended outcomes, aswell as a distortion of information to the central government.Experiences from a recent transition of regime towards a kindof closed block grant system, illustrates new types ofadaptive behaviour but also the problem of finding a formulafor a fair allocation of resources among local governments.When designing a block grant system a distinction must be madebetween expenditures and resource needs; cost expenditure datado not necessarily reflect resource needs in cases where thereare national categorical equity goals related to socialservices of a merit-want character.     

Fiscal decentralization and the size of government: a European country empirical analysis

This article is an original contribution to the understanding of the relationship between fiscal decentralization and government size. Using a panel data set of the EU-15 countries, we analyse the effect of decentralization on aggregate, national and subnational government sizes by separating the long run effects of decentralization from its short run dynamics. In the long run, tax autonomy reduces central expenditure but increases—and to a greater extent—subnational public expenditure, leading to higher aggregate public expenditure. We find also that vertical imbalances tend to increase the sizes of subnational, national and aggregate governments.     

The robustness of quadratic voting

Combining local council election data with fiscal data on grant allocations in a German state, we study partisan favoritism in the allocation of intergovernmental transfers within a quasi-experimental framework. We hypothesize that state governments pursue two distinct goals when allocating grants to local governments: (1) helping aligned local parties win the next election and (2) buying off unaligned municipalities that may obstruct the state government’s policy agenda. We argue furthermore that the relative importance of these two goals depends on local political conditions. In line with this argument, we show empirically that the effect of political alignment on grant receipts varies depending on the degree of local support for the state government. While previous contributions find that aligned local governments always tend to receive larger transfers, our results imply that the political economy of intergovernmental transfers is more intricate.     

Asymmetric Effects of Intergovernmental Grants: Analysis and Implications for U.S. Welfare Policy

Theories of federal grants to states and localities suggestthat these grants have a stimulative effect on spending, causingrecipient governments to expand and contract programs alongwith changes in the grants. However, policymakers may responddifferently to grant decreases than to grant increases becausethey face political and bureaucratic pressures to expand programs.These asymmetric reactions may depend on specific politicalstructures. Pooled time-series regressions of data from theAid to Families with Dependent Children program across 46 statesfrom 1965 to 1994 demonstrate state government responses togrant changes. Bureaucratic pressures and proposals lead statesto expand their welfare benefits upon increases in federal grants,but not to contract them upon decreases in federal grants. Withregard to the 1996 welfare reforms, this study indicates thatthe switch to block grants will lead to little or no state reductionin welfare payments.     

The Limits and Opportunities of Networks: Municipalities and Canadian Climate Change Policy

Research on climate change policy and politics has become increasingly focused on the actions and influence of subnational governments. In North America, this attention has been particularly focused on why subnational governments have taken action in the absence of national leadership, what effect action might have on future national climate policy, and whether the collective action of networks of municipal governments are reshaping and challenging the character of national and global climate governance. This paper examines Canadian municipal climate in light of the absence of a comprehensive and effective climate national strategy. The paper considers various reasons why local governments in Canada have not been central players in national plans, and why their actions have not been more influential nationally. The paper argues that the potential influence of Canadian municipalities on national climate policy is weak, given the loose nature of the network and the long-held structural view that municipalities are not significant units of political analysis in national political and policy debates. The paper concludes by considering the constraints and opportunities of subnational climate networks and municipal network analysis.     

The home front: Internal organization of public affairs in Dutch subnational governments

Dutch subnational governments such as municipalities and provinces are increasingly compelled to express their interests in the national and European political arenas. Effectiveness in these arenas requires an optimal arrangement of Public Affairs (PA) activities in the subnational organization. Based on 41 in‐depth interviews with prolific PA professionals and practitioners in the Netherlands, this article provides an overview of initiatives that subnational government organizations have to develop in their own organization after their “discovery” of how useful PA may be, but before the moment they enter the arenas. According to the participants, the creation of individual, collective, and regional commitment regarding PA is the first initiative. Subsequently, conditional and instrumental terms should be fulfilled, so that PA will be used as a tool to model PA messages. Concluding from the interviews, human aspects and internal cooperation determine the sensemaking of PA in a subnational organization, but a lack of arena knowledge frustrates this process.     

The Fly Ball Effect: A Theoretical Framework for Understanding the Impacts of Short‐Term Seed Grants

The federal government has long used grants‐in‐aid to encourage state and local governments to carry out federal policies. Little research has been done that examines how short‐term seed grants affect program continuation. We propose the “fly ball effect” as a theoretical framework for understanding how seed money should impact program maintenance. Our theory suggests that short‐term seed grants by themselves should result in considerable funding uncertainty and program eliminations or stagnation once the initial grant money expires. We use data from drug court start‐ups in four states to provide empirical support for our theory. We argue that understanding the logic of the fly ball effect can help granting governments to improve the effectiveness of their grant funding systems, at least as measured by strong program continuation and expansion.     

On “Group size and the free-rider hypothesis: Another hypothesis.” by Jody W. Lipford: Comment

This paper develops a positive approach to grant design when the central government and a lobby of local governments are the main agents. It develops the hypothesis that the regressivity or progressivity of per capita grants regarding community size is,ceteris paribus, related to the structure of the lobbying activities of local governments and is independent of hypothetical economies or diseconomies of scale in the production of local public goods. An encompassing lobby organisation using a “one mayor one vote” system of representation supports the regressivity of per capita grants while under “proportional” representation the lobby will support a design of per capita grants which is progressive towards community size. An empirical analysis of lump-sum grants in Portugal supports the politico-economic hypothesis and rejects the hypothesis that economies of scale is the main explanatory cause for the observed regressivity of per capita grants.     

Municipalization as Central Government Strategy: Central-Regional-Local Politics in Peru, Brazil, and South Africa

This article analyzes how central governments can use municipaldecentralization to weaken intermediate levels of governmentusing evidence from Peru, Brazil, and South Africa in the 1990s.Two principal questions are addressed. First, why did centralgovernments opt for municipalization in these countries? Second,how did the municipalization processes proceed? In these cases,the strategic calculus behind municipalization is eminentlypolitical: central government incentives to counter the powerof the intermediate level of government trigger these processes.Specific strategies to enhance municipal power vary from countryto country and include revenue municipalization, expendituremunicipalization, and juridical changes to strengthen localities.These three quite different cases show that central governmentscan make strategic and tactical decisions in intergovernmentalrelations to favor one level of subnational government to thedetriment of another.     

Goal Conflict and Fund Diversion in Federal Grants to the States

Researchers using fiscal choice models have had limited success predicting fund diversion in federal grant programs. The application of a principal-agent framework to questions of fiscal federalism offered a potentially valuable alternative approach, but the traditional model employed by Chubb (1985) neglected potential variability in the degree of goal conflict between principals and agents. This article proposes an expanded framework, which incorporates the possibility of variation in goal conflict between participants in intergovernmental aid programs. The theory suggests that the level of policy congruence between recipient jurisdictions and the national government will determine the amount of grant funding diverted away from targeted policy areas. Findings from analyses of grant programs in two distinct policy areas support the hypothesis that grant effectiveness is partially a function of goal congruence. The relationship between intergovernmental partners is interactive, with the degree of policy agreement determining fund diversion in subnational jurisdictions, as well as the effectiveness of federal oversight activities. The findings have important theoretical implications for understanding both fiscal federalism and principal-agent relationships more generally.     

Urban Local Governments and the Flypaper Effect: Evidence from Maharashtra, India

This article examines decentralization in the state of Maharashtrain India, especially with respect to the functioning of itsurban local governments. Using panel data, the article specificallyinvestigates the flypaper effect of grants from the state governmentto urban local bodies. It also addresses the asymmetry hypothesis,which states that subnational governments respond differentlyto a reduction in grants than to an increase. Our results demonstratethe presence of the flypaper effect, but evidence regardingthe asymmetric response to a reduction in grants is ambiguous.     

Why Is Central Regulation of Local Spending Decisions So Pervasive? Evidence From a Case Study

While the “classical” theory of fiscal federalism argues that local authorities should have substantial discretion to set the local budgetary mix, surveys show that central regulation of local spending decisions is pervasive. Norway provides an ideal setting for studying spending regulations. An attempt to decentralize fiscal choice to the local levels, the block grant reform, has been reversed in recent years. This article presents a case study of the interaction between a county and the national government from 1986, when the reform was implemented, to 1992. The study concludes that the government introduced new regulations to prevent local authorities from distorting spending decisions in order to elicit higher grants.     

Autonomous Local Climate Change Policy: An Analysis of the Effect of Intergovernmental Relations Among Subnational Governments

Local governments have emerged as important players in climate change governance, both at home and on the international stage. Likewise, action by states and provinces has been increasingly highlighted, particularly as national actors have moved slowly to reduce greenhouse gas emissions. But to what extent do local governments act independently from state and provincial governments in the area of climate change mitigation? Using an explicit process tracing approach, the article tests two hypotheses regarding the influence of upper level subnational governments on local policy. In Vancouver, British Columbia, Canada, a city that is a climate change leader, provincial government intervention cannot explain the results of climate change mitigation policy making. This suggests that local governments can exercise an important degree of autonomy over climate change policy, but also implies that where municipalities are less independently committed to climate action, active upper level government intervention will likely be needed.     

Local government grants and income tax revenue: Redistributive politics in Norway 1900–1990

An important aspect of the welfare state is public provision of private goods, primarily education and health care. In Norway the provision of these services has been organized through the local public sector. The development of the welfare state has to a large extent been the development of welfare communes. The important revenue sources of the local and county governments, grants and income tax revenue, have been controlled nationally, and the paper addresses the determinants of these revenues during 1900–1990. The approach combines a demand model of local public services emphasizing price and income-elasticities with a political economy model of central government ideology and strength. The decision making is understood as bargaining between the government and interest groups, and the political structure consequently is of importance for the policy outcome. The analysis shows how politics matter, and the results indicate that a minority coalition government implies 30% more grant and income tax revenue to local and county governments than one party majority in the long run.     

Taiwan’s political ecology after the November 1997 local election

From the late 1940’s to the late 1980’s, the political system in Taiwan can be best characterized as one-party system, with the Kuomintang (KMT) as the dominant ruling party. In the November 1997 local election, the KMT was defeated by the opposition party, Democratic Progressive Party (DPP), for the first time. The DPP not only gained more county and city posts at the provincial level but also grabbed more votes than the ruling party, resulting in a new political order. At the local level, a two-party system has emerged. The general population prefers a cleaner and more efficient government. Many voters in the November 1997 election voted for the candidates—not the party—of their choice. Unless the KMT can welcome back the New Party (NP), its ruling party status at the national (as opposed to central) level may be called into serious question. Before the legislative election of December 1998 and the direct, presidential election of March 2000, it seems that the KMT will try to co-opt members of the NP. There could be tension between the central and local governments in Taiwan on many issues in the foreseeable future, such as whether or not the Republic of China (ROC) flag should be hoisted in schools and how much financial support the local governments can get from the central government. It is highly doubtful that the DPP can grab the presidency in the year 2000. Most voters are not ready for such a new order at the presidential or central (as opposed to national) level.     

Citizen political knowledge and accountability: Survey evidence on devolution in Kenya

Devolution complicates citizens’ ability to assign responsibility for the provision of public goods and services to different tiers of government. Misattribution of responsibility limits the effectiveness of electoral accountability in the nested principal–agent relationships comprising voters, politicians, and bureaucrats. This raises two important questions. First, how do citizens learn about the functions of different tiers of government under devolution? Second, how do levels of political knowledge condition citizens’ evaluations of subnational governments? Using cross‐sectional and panel survey data from Kenya (2014–2018), this article shows that voters accumulate knowledge through exposure to government services, and that gender and partisanship mediate knowledge accumulation. In addition, exposed citizens are more likely to give positive evaluations of subnational politicians, despite the fact that such exposure may reveal subnational governments’ low capacity, ineffectiveness, and governance gaps. These findings advance our understanding of the dynamics of political accountability under devolution.     

Federal Intervention in the Municipal Bond Market: The Effectiveness of the Build America Bond Program and Its Implications on Federal and Subnational Budgeting

The American Recovery and Reinvestment Act of 2009 (ARRA) included several new federal programs intended ostensibly to “unfreeze” the credit markets as a result of the global financial crisis. One such program, the Build America Bond (BAB) program, aimed to lower the borrowing costs for state and local governments by increasing their access to capital and providing a more generous federal subsidy than the traditional indirect tax exemption subsidy. BABs are taxable bonds sold by subnational governments, which carry a 35 percent direct federal payment subsidy to the borrower. In creating this program, the federal government hoped that the large direct federal subsidy along with greater potential investor interest in taxable securities would result in lower borrowing costs for state and local governments vis‐à‐vis traditional tax‐exempt bonds. This research study examines the relative effectiveness of the BAB program and details the various quantitative and qualitative implications on federal and subnational budgeting by moving from an indirect to a direct federal subsidy approach in facilitating state and local government capital raising.