Critical Debates

When Decentralization Matters:Subnational, Municipal,

and New Intertier Relations

Veronica Herrera

Tulia G. Falleti, Decentralization and Subnational Politics in LatinAmerica. New York: Cambridge University Press, 2010. Tables, fig-ures, bibliography, index, 312 pp.; hardcover $85, paperback $27.

Merilee S. Grindle, Going Local: Decentralization, Democratization,and the Promise of Good Governance. Princeton: Princeton Univer-sity Press, 2007. Tables, figures, bibliography, index, 248 pp.; hard-cover $45.

Pierre F. Landry, Decentralized Authoritarianism in China: The Com-munist Party’s Control of Local Elites in the Post-Mao Era. New York:Cambridge University Press, 2008. Tables, figures, bibliography,index, 320 pp.; hardcover $93.

Daniel Treisman, The Architecture of Government: Rethinking PoliticalDecentralization. New York: Cambridge University Press, 2007. Fig-ures, bibliography, index, 348 pp.; hardcover $93, paperback $27.

As more countries—both federal and unitary—transfer decisionmak-ing authority to two or three tiers of government, scholars and pol-

icymakers have engaged in lively debates about the efficacy, efficiency,and significance of these decentralization transfers. Numerous scholarshave shown that the transfer of political, fiscal, and administrativeauthority to subnational tiers of government has become as fundamen-tal and pervasive a phenomenon in developing regions as were thedemocratization and market reforms of the last two decades.

The decentralization literature is broad, and encompasses a widerange of research questions about the relationship between decentral-ization and democracy, policymaking, fiscal accountability, economicgrowth, and ethnic conflict. Proponents of decentralization, building onfiscal federalism theory dating back to Tiebout (1956), stress that fiscaldecentralization can better allocate resources because it producesknowledge about local preferences and competition among jurisdictionsfor better services.1 Coupled with the oft-cited Tocquevillean trope(1835) that decentralization “brings government closer to the people,”

© 2012 University of MiamiDOI: 10.1111/j.1548-2456.2012.00157.x

such arguments have helped fuel decentralization trends throughout thedeveloping world in recent decades. Others have argued that decen-tralization may have negative consequences, creating macroeconomicinstability under soft budget constraints (Rodden and Wibbels 2002),exacerbating clientelism and corruption (Fox 1994), or increasingregional inequalities (Prud’homme 1995).2 It is interesting that both crit-ics and proponents of decentralization share the assumption that decen-tralization transfers increase the authority of subnational actors and pro-duce a non-neutral and generalizable effect.

The four works reviewed in this essay represent a new generationof scholarship that challenges previous assumptions in the decentraliza-tion literature, and together help to map out a new research agenda forstudying decentralization and subnational politics. In the spirit of push-ing past older debates in the decentralization literature, future scholar-ship might be inspired to design research that investigates three newlines of inquiry. First, scholars might move away from institutionalanalyses and emphasize instead the political strategies, contestation, andnew policymaking agendas that the decentralization design unleashes atthe subnational level. As an analytical rubric, the design of subnationalinstitutions is important, but largely because institutions reveal insightsabout the constraints and incentives of subnational actors and thechange in the relationship among subnational actors from centralized todecentralized settings.

All the works under review address this theme. For example, TuliaFalleti emphasizes how the resulting institutional design (in this case theorder of the sequence of decentralization types) is determined by coali-tional bargaining between national and subnational interests, and Mer-ilee Grindle examines how mayors compensate for municipal govern-ment’s institutional weakness in Mexico by bargaining over resourceswith their state and federal government. Pierre Landry’s study empha-sizes the various management strategies the center employs to keeplocal officials bound to the institutional rules and adherence to thecenter. Daniel Treisman warns against valuing decentralization as aninstitutional configuration for its own sake, recommending instead thestudy of political strategies and the behavior of subnational actors givenparticular decentralized settings.

A second fruitful venue for future research is to examine thereordering of relations between multiple tiers of government that decen-tralization transfers unleash. New research questions may investigate theformation of coalitions within and across multiple tiers of government,new policymaking responsibilities that are now shared between multi-ple tiers of government, or new jurisdictional debates about sovereignty,authority, and responsibility in shared policymaking arenas. In particu-lar, new research might investigate the newly constructed relationship

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between the subnational tiers after decentralization: intermediate (state,province, länder), and local (municipal, township, ayuntamiento, city).Do state and municipal governments have different interests andresources in regard to each other, the federal government, or their con-stituents? Under what conditions do they cooperate; what factors lead tocontestation? How do governors and mayors distinctly differ in terms ofpolicymaking responsibilities, ideological commitments, partisan identi-ties, and responsiveness to constituents? These are all important empir-ical and analytical issues stemming from decentralization transfers thatmerit future attention. Both Grindle and Landry emphasize how inMexico and China, respectively, the tier of government directly abovethe local level has a significant amount of control over the local level.While Falleti does not unpack the relationship between states andmunicipal governments in her analytical model, she does call for thistype of analysis in future research.

Yet another line of inquiry that has been underdeveloped is the sys-tematic analysis of municipal governance and policymaking after decen-tralization transfers. Theories of federalism and decentralization haveprioritized the role of intermediate levels of government over local gov-ernments. This emphasis is particularly problematic, as decentralizationreforms have increasingly transferred policymaking responsibilities tomunicipal governments. The works reviewed here begin to contributeto this lacuna: both Grindle and Landry explicitly examine municipalgovernance, and Falleti also calls for greater emphasis in future researchon the role of local government. Future research might systematicallycompare the role, interests, and capacities of municipal governmentsafter decentralization reforms, accounting for variation across regionsand sectors in the same country. These types of research questionswould more accurately capture the pervasiveness of municipal policy-making and the great variation across municipal governments in termsof resources, capacity to govern, level of adherence to partisanship, andconstituent responsiveness.

This review turns first to the two qualitative works that engagespecifically with Latin American cases, Falleti’s Decentralization andSubnational Politics in Latin America and Grindle’s Going Local. Thesetwo books focus on subnational politics and policymaking, addressinghow bargaining across different tiers of government shapes decentral-ization outcomes. Landry, in Decentralized Authoritarianism in China,and Treisman, in The Architecture of Government, use diverse quantita-tive tools to dispel commonly held assumptions about the consequencesof decentralization.

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CHANGING THE BALANCE OF POWER

Falleti provides compelling evidence for the argument that decentral-ization does not always empower subnational actors. ExaminingArgentina, Brazil, Colombia, and Mexico to develop her thesis andselecting the education sector for the administrative decentralizationcomponent of the analysis, she develops a sequential theory to explainthe degree of change in the intergovernmental balance of power afterdecentralization reforms.

The theory distinguishes among political (P), administrative (A), andfiscal (F) decentralization, stressing that each tier of government has dif-ferent preferences for each of the three policies, as well as the order inwhich they occur. For example, national governments prefer to abdicatethe burden of administrative responsibility first, the double-edged swordof fiscal responsibility next, and political power last. In contrast, gover-nors and mayors would rather first assume political authority, then thegreater autonomy that fiscal responsibility provides, and finally, com-plex and often unfunded administrative burdens.

Falleti argues that the dominant decentralization coalition that pre-vails in the first round of decentralization negotiations helps determinesubsequent decentralization policies. Decentralization coalitions arebased on a group’s territorial interests (with which tier of governmentthey are aligned) and their partisan interests. When dominant groups“call the shots” throughout most of the bargaining process, the outcomereflects the dominant group’s first choice because the preferences of thedominant group are self-reinforcing. For example, national-level inter-ests predominated in Argentina, and subnational level interests won inBrazil and Colombia. However, when dominant group dynamics shiftduring the bargaining process because previously nondominant groupsbecome dominant—a process Falleti calls “reactive mechanisms”—hybrid outcomes result, such as the A→P→F sequence in Mexico. Theordering of sequences, which is conditioned on the bargainingprocesses between coalitions, produces varying degrees of subnationalautonomy.

This book is an exemplar of thoughtful, thorough, and original com-parative historical research. Falleti strikes a difficult balance betweenparsimony in the model and complexity in the four cases. The countrychapters explain the incountry dynamics that lead to different sequencesof decentralization reforms with rich detail, but utilize well-conceptual-ized and -delineated comparative categories of analysis that are carriedacross the four cases. Falleti’s focus on coalitional bargaining capturesthe diversity of actors, interests, and resources across the three tiers ofgovernment and the instances when they choose to cooperate or not.Such a focus on the territorial interests nicely moves beyond older

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debates about whether decentralization has produced a positive or neg-ative effect, and illustrates the subnational politics and reordering ofintergovernmental relations that decentralization policies haveunleashed. Falleti is right to emphasize the multiple feedback loops andnegotiations that can reverse or alter the course of a policy. This booksystematically and clearly addresses the variable of timing, offering afresh approach to the work on path dependency by stressing that notonly timing and history matter, but that sequencing, and ordering, shapepolitical outcomes.

Several critical questions may be raised about Falleti’s book. First,the author does not effectively distinguish between intermediate (state,provincial) and local (municipal) interest levels. In her model, the twohave the same preferences in regard to the decentralization sequencingprocess, which is understandable, since the preferences are conceptual-ized as a response to national-level interests to some degree. However,unpacking the varied interests and resources of the intermediate andlocal tiers of government would have advanced further the study of ter-ritorial interests within subnational tiers and of how these dynamics varyacross the four cases. For example, in Brazil, municipal governmentsgenerally have more autonomy in relation to their state governmentsthan do Mexican municipalities.

A second concern is that this work addresses only the initial decen-tralization policy reforms, not policy outcomes after these reforms orhow the balance of power that is established may shift after a period oftime. It would be interesting to see how the scoring of the final outcomemight change over time and how the theory would predict the ways thatnational and subnational interests defend and assault different compo-nents of these policies once in place.

The reader may also wonder how the theory developed might havebeen different had Falleti chosen a sector other than decentralized edu-cation policy for the administrative decentralization component understudy. How does health policy, the potable water sector, transportation,or another sector vary in terms of policymaking priorities, availableresources, technical complexity, and so on? How do such factors affectcoalition building and bargaining among relevant actors? This point isparticularly relevant when speaking of territorial interests, which Falletiadmits reflect the geopolitical conditions of a region, such as rich versuspoor, urban versus rural, extractive versus service-based, and so on (41).It is conceivable that a sector’s specific characteristics (physical, techni-cal, financial) would change its salience for different regions and poli-cymakers. These issues notwithstanding, this ambitious and thought-provoking work effectively captures the dynamism of subnationalpolitics during decentralization reforms, and will inspire new genera-tions of researchers.

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While Falleti focuses on four Latin American countries, MerileeGrindle examines the efficacy of municipal policymaking after decen-tralization reforms in Mexico. She develops a “municipal performanceindex” with 17 indicators based on 5 aspects of local governance:municipal efficiency (effectiveness, responsiveness, development orien-tation, ability to plan ahead) and change initiatives (ability to track andimprove performance over time). Comparing 30 randomly selectedmedium-sized Mexican municipalities, Grindle evaluates 4 hypothesesabout variation in municipal performance outcomes: political competi-tion, local political leadership, public sector modernization, and civilsociety activism. Grindle concludes that the greatest impact on munici-pal performance comes from the leadership skills of mayors, who havea great amount of discretion, either to perpetuate cronyism and corrup-tion or to innovate and create new projects. Public sector modernizationalone does not improve performance, but if used by innovative mayors,it can be a vehicle for public sector improvements. Neither competitiveelections nor civic pressure is found to increase performance.

This work establishes important characteristics of Mexican munici-palities that were previously underexamined, and will aid futureresearch agendas on municipal policymaking in Mexico and beyond.For one thing, Grindle concludes that low levels of institutionalizationin Mexican municipalities lead to a wide range of discretion for mayorsto “reinvent” municipal policymaking—for better or worse—when theytake office. Mayors have the authority to bring in all new staff and intro-duce new policies and procedures (171), but they must also contendwith the difficulty of institutionalizing new policies beyond the lifespanof the municipal administration under which the policies began (181).A second characteristic is that party platforms do not exist at the munic-ipal level in Mexico, leaving a lot of room for independent policymak-ing outside the mandates of the political party to which mayors belong(170–71). Third, successful mayors learn the importance of developingrelationships with different tiers of government; the most successfulones learn how to bring down resources from the state and nationallevel (179).

Finally, Grindle rightly stresses the limits of civic society in monitor-ing municipal governmental performance in Mexico. She finds that civicgroups are much better at organizing in order to extract benefits fromgovernment than organizing to serve as watchdogs for greater accounta-bility (174). Such a conclusion further undermines the Tocquevilleanthesis that decentralization leads to greater civic accountability.

The book stresses agency over structure: individual leadership,rather than the characteristics of institutional arrangements or the polit-ical considerations of coalitions, is the key determinant of municipalpolicymaking, according to Grindle. Although the high level of mayoral

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discretion in shaping municipal outcomes is central to the story, thisexplanation seems incomplete. While few readers would disagree thatleadership and ideas shape policy outcomes, the question of under whatconditions mayors push for innovation and improved municipal per-formance remains unanswered. Are there policy coalitions that pressurefor reform? If so, what are their interests, how do they bargain overresources, how do they align within and across different tiers of gov-ernment? Do partisan politics matter, and if so, how? In this sense, thepolitics of municipal policymaking is underdeveloped in Grindle’sagency-centered explanation.

Another issue is the analytical proximity of some of the explanatoryvariables to the outcome in question. Some of the dimensions in Grindle’smunicipal performance outcome seem to be conceptually similar to thestate modernization independent variable (e.g., operational plans, func-tioning websites, computerized tax system). The book does not doenough to explain how these are two independent phenomena, and howthe effect of one (state modernization) is being tested on the outcome(performance as measured by modernization indicators). A similar issuearises with the measurement of the leadership independent variable: towhat extent are the innovations being measured as the dependent vari-able analytically distinct from the supposed independent effect of amayor’s level of leadership and performance? It would have been inter-esting to see indicators for leadership and performance in this book, toevaluate how they are analytically different from the outcome in question.Nevertheless, Grindle’s book will be of great interest of students of decen-tralization, municipal policymaking, and public administration.

CONTESTING ASSUMPTIONS

Whereas Falleti and Grindle undertake in-depth case studies to under-stand the impact of decentralization reforms on subnational politics, thebooks by Landry and Treisman use quantitative methods to critiquecommonly held assumptions about decentralization. In DecentralizedAuthoritarianism in China, Landry sets up a compelling puzzle byreminding readers that despite its lack of political competition and itsauthoritarian status, China is actually one of the most fiscally decentral-ized countries in the world: in 2002, local government expenditureaccounted for 70 percent of all state expenditures (3). He then presentsan interesting research question: how has the Chinese Communist Party(CCP) been able to fiscally decentralize—and by some accounts, pro-mote regional economic growth—without threatening the durability orstrength of the regime?

Landry argues that by implementing a strategy of decentralized per-sonnel management, the CCP leadership has been able to preserve the

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regime without weakening political control. He demonstrates how theCCP’s personnel appointment system—the means by which the careersof local officials at different tiers of government are managed and con-trolled by the tier above—has allowed the CCP to maintain regime sta-bility. Some of the key institutional reforms that have taken placeinclude replacing the party policy of appointing personnel from “twolevels down” to “one level down” in order to tighten personnel over-sight (chap. 2); creating new local government bodies, such as line-itemcities and deputy provincial municipalities (chap. 2); and strict enforce-ment of local official retirement regulations in order to shorten thetenure of mayors, thus increasing the party’s control over appointmentsand promotions (chap. 3). Landry argues that these new institutionalrules, enhanced by the “one level down” appointment system, havebeen the glue that has held the whole together, as “each layer of localgovernment is critically constrained by the capacity of a hierarchicallysuperior unit to appoint, remove, or dismiss the leading officials in thelocale in question, regardless of its economic importance” (79).

Like the CCP’s strategy of personnel management that he studies,Landry’s project is presented as a nested hierarchy, beginning with areview of the CCP’s institutional reform of local-level administrativeunits and then presenting increasingly more microlevel analysis of eachunit and the institutional norms that bind them to the CCP. The impres-sive amount of data and mixed methods leveraged in this work is boththe work’s greatest strength and weakness. At times, the chapters readas disjointed pieces that do not congeal as a whole, and some of thechapters would perhaps have worked better as separate papers ratherthan as portions of the book (for example, the village-level analysis inchapter 6 does not fit evenly into the remainder of the argument).

It would have been interesting to see a research design that testedwhether there was wide variation in the adherence to CCP institutionalrules, or local elite perceptions about institutional norms, rather than astudy that privileges one region (the wealthy Jiangsu Province) overothers. It would also have been interesting to understand better the polit-ical dealings and maneuverings—the politics—of the subnational level inChina, something that a qualitative component would have nicelyrevealed. Landry does an admirable job of managing the concept ofdecentralization in an authoritarian setting—his definition is understand-ably restricted to the fiscal component of decentralization rather than thepolitical and administrative—but he does present a convincing accountof the political benefits the center derives from fiscal decentralization.

This book will undoubtedly appeal both to China specialists anddecentralization scholars, as Landry challenges basic assumptions aboutthe relationship between decentralization and the erosion of statecapacity in a novel and convincing way. What is missing from the

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study—the backdoor deals, varying degrees of compliance with thecenter by local actors, other types of political calculations, strategies,and relationships initiated by local-level actors—is perhaps outside thescope of this book, but a worthwhile focus for future research.

In a similar way, Daniel Treisman’s Architecture of Government isan impressive theoretical exercise that convincingly dispels an array ofwidely held assumptions about the promise of decentralization, from itspotential to increase civic participation to its efficiency in satisfying civicdemands, increasing competition among local governments, and diffus-ing ethnic conflict—as well as its consequences for fiscal discipline. Hisconclusion is provocative: decentralization is neither necessarily worsenor better than centralization, and therefore does not lead to broadlygeneralizable claims. Treisman argues not that decentralization does nothave particular effects under specific conditions, but rather that theeffects are context-specific, coupled with other important factors, andtherefore do not easily provide for generalizable claims. In a refreshingtwist (like Falleti’s work), Treisman critiques assumptions from both theproponents and the critics of decentralization, finding that decentraliza-tion’s effects are “complex and obscure. Many effects pull in differentdirections, leaving the net result indeterminate” (6).

The first portion of the book addresses assumptions about decen-tralization and fiscal discipline, macroeconomic stability, and businessclimates. In chapter 4, Treisman debunks Tiebout’s classic 1956 argu-ment about decentralization promoting competition among local gov-ernments. Treisman finds that competition among local governmentsmay have the opposite effect: it may lead to higher tax rates or lessbusiness-friendly spending than under centralization, or that centralgovernments can actually replicate the beneficial competition withoutgiving up control to local officials.

In chapter 5, Treisman takes aim at the well-known argument thatsoft budget constraints create fiscal indiscipline at the subnational levelbecause local governments can pressure the center to increase fundingand drive up public spending. Treisman argues that this logic holdsunder very specific conditions (such as when local governments pre-commit themselves to spending levels rather than tax rates); but if theseconditions do not hold, then spending may actually be lower in decen-tralized settings and actually “harden” local government budget con-straints. Chapter 6 demonstrates that a trade-off between empoweringlocal governments and enabling central governments to provide servicesdoes not produce an efficient outcome. Chapters 7 and 8 turn to thepolitical effects of decentralization, showing that decentralization nei-ther makes citizens more participatory nor makes local politicians moreaccountable. In sum, the relationship between decentralization andthese fiscal and political phenomena is inconclusive.

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The Architecture of Government is an ambitious and sophisticatedanalysis that is primarily a theoretical critique, not an empirical work. Theformal modeling in the book may make it less accessible to some read-ers, but it provides an important and level-headed contribution to thedecentralization literature that has long been dominated by debates aboutthe pros and cons of decentralization in abstract settings. A few issuesmay have been better clarified in the text. For example, Treisman’s use ofthe subnational level for modeling purposes is oversimplified in its defi-nition, and takes intermediate levels and municipal levels of governmentas interchangeable. A more thorough discussion of how different tiers ofgovernment represent different interests compared to one another andhow they are analytically separate would have been a nice complementto the overall argument. Also, the decontextualized nature of Treisman’stheoretical work makes for a parsimonious analysis and presentation butmisses the opportunity to supplement the argument with empirical analy-ses of decentralization processes that produce mixed or neutral effects.

Furthermore, Treisman’s overall argument that decentralization pro-duces nongeneralizable effects is undermined by his conclusion, inchapter 8, that decentralization does promote policy stability. He doesnot consider this an exception to his argument because reducingchanges in policy may be undesirable (for example, in authoritarian set-tings). Nevertheless, policy stability seems to be an important outcome,irrespective of the multidirectional set of values associated with it, andTreisman could have done more to explain how this significant findingfits into his schema.

Those who study decentralization will agree that the many factorsaffecting outcomes are complex and multidirectional. It is difficult todisagree with the basic claim that decentralization may or may not bebeneficial, depending on how the political game is played out overtime, as Treisman himself notes (246). In other words, decentralizationis merely an institutional setting, and several other context-specific fac-tors will affect the politics of that institutional setting. By comparing thechoices of local governments in different regions of a country at differ-ent points in time, exploring the strategy of the central government inregard to its regions, or explaining a puzzling outcome in decentralizedsettings, Treisman calls for empirically rich and contextually specificexplanations within the decentralized framework rather than broad gen-eralizations about the effects of the institutional design. The Architectureof Government will be useful reading for students of decentralizationand federalism and for those wanting concise and well-specified exam-ples of formal models accompanied by accessible discussions of theirstrengths and limitations.

Taken together, these four works enhance our understanding ofsubnational politics, emphasizing the importance of studying the poli-

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tics that unleash and are unleashed by decentralization transfers. Futureresearch should examine the reordering of intertier relations, particularlythe state and municipal relationship, as well as further emphasize theimportance of studying municipal governance after decentralizationreforms. Such scholarship would contribute to our understanding ofnew and underexamined empirical realities, as well as update theoriesof decentralization and federalism.

NOTES

For helpful comments on this article, I thank Ben Allen, Adam Cohon, DavidCollier, Jody Laporte, Danielle Lussier, Lindsay Mayka, and Neal Richardson.

1. See Rubinfeld 1987; Oates 1972 for surveys of this vast literature.2. These are just a small sample of the broad literature on decentralization.

See Grindle for a concise review of the decentralization literature and Treismanfor the leading normative arguments made in the decentralization literature.

REFERENCES

Fox, Jonathan. 1994. Latin America’s Emerging Local Politics. Journal of Democ-racy 5, 2: 105–16.

Oates, Wallace. 1972. Fiscal Federalism. New York: Harcourt Brace Jovanovich.Prud’homme, Remy. 1995. The Dangers of Decentralization. World Bank

Research Observer 10, 2 (August): 201–20.Rodden, Jonathan, and Erik Wibbels. 2002. Beyond the Fiction of Federalism:

Macroeconomic Management in Multitiered Systems. World Politics 54:494–531.

Rubinfeld, Daniel. 1987. The Economics of the Local Public Sector. In Hand-book of Public Economics, vol. 2, ed. Alan Auerbach and Martin Feldstein.Amsterdam: North Holland. 571–645.

Tiebout, Charles. 1956. A Pure Theory of Local Expenditures. Journal of Politi-cal Economy 64, 5: 416–24.

Tocqueville, Alexis de. 1835. Democracy in America. London: Saunders andOtley.

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