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Decentralizing development: Allocating public goods via competition.

Decentralizing the allocation of public goods by giving funds directly to communities takes advantage of local information concerning needs, but leaves funds open to misuse or capture by local elites. A large scale development project in Indonesia attempts to overcome this downside of decentralized...

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Published in:Journal of Development Economics Vol. 93; no. 2; pp. 264 - 275
Main Author: Chavis, Larry
Format: Article
Published: Elsevier Science November 2010
Subjects:
Public goods
Road costs
Competition
Resource allocation > Mathematical models
Economic competition
Community development
Indonesia
Online Access:View this record in EBSCOhost
Summary:Decentralizing the allocation of public goods by giving funds directly to communities takes advantage of local information concerning needs, but leaves funds open to misuse or capture by local elites. A large scale development project in Indonesia attempts to overcome this downside of decentralized allocation by having communities compete locally for block grants. Competition weeds out less efficient projects. Increasing the number of villages bidding by 10% leads to a 1.8% decline in road construction costs. Increased community participation in project planning also leads to better outcomes. Copyright (c) 2010 Elsevier B.V.