ALICE Z. XU

Public Service Delivery under Decentralization: Inter-governmental Arrangements and Local Horizontal Institutions

Brazil's 1988 Constitution specified measures for decentralization, delegating the responsibilities for implementing urban sewage and clean water services between the different tiers of government. Interviews with individuals involved in the sanitation sector reveal various political constraints (i.e., political alignment, political competition, and term limits) that define the politics of coordination between levels of government. Interviewees pinpoint procuring sufficient funding in the form of federal transfers is the most limiting impediment to sewage services. The focus of this paper is on explaining variation in urban sewage and clean water piping across Brazilian municipalities as a function of these political constraints.

While some authors frame decentralization as a means for ``deepening" local democracy and improving resource allocation, others have found that it can augment distributional conflicts and lead to more inequality. In this article, I show that under a decentralized setting, inter-governmental political dynamics interact with variation in local, democratic institutions. Using a regression discontinuity design for close municipal elections in Brazil, I find that political alignment with upper levels of government increases the provision of sanitation infrastructure in the corresponding local jurisdiction. In addition, using exogenous variation in municipal electoral rules, I find that contrary to existing theory, local political competition decreases public service delivery. Combining both mechanisms into a two-dimensional RDD, I show that political alignment has a more pronounced effect in municipalities with high electoral competition. The findings demonstrate that the effects of decentralization on spatial inequality are more nuanced, because vertical, inter-governmental arrangements interact with horizontal, local institutions.