Ekaterina Zhuravskaya



(Monday, 19th May 2008)

Title : Decentralization and Political Institutions in Developing Countries

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Workshop abstract:

The goal of this workshop is to discuss recent research on the longstanding topic: Which conditions are necessary for decentralization to bring the desired benefits? The debate about whether federalism is a good thing for large developing countries has been active for 50 years and, recently, the debate came to the attention of empirical literature (see Bardhan 2002 for a survey.) Empirical literature yielded inconclusive results before it turned to Riker’s (1969) classic work introducing political institutions into the picture. Riker hypothesized that economic decentralization in developing countries works only under some degree of political centralization. Riker’s ideas found solid support in the data (e.g., Blanchard and Shleifer 2002; Enikolopov and Zhuravskaya 2007; Gennaioli and Rainer 2007).    

Outline of the workshop:

  1. Summary of the costs (Musgrave and Oates) and benefits (Tiebout) of decentralization
    • “Market-preserving” vs. “State-corroding” federalism
    • Inconclusive results of empirical research that does not take political institutions into account
  2. Riker’s hypothesis about political centralization
    • Empirical tests of Riker’s hypothesis
  3. Alternative mechanisms (i.e., federal oligarchs)

Bibliographical references :

Must read reference : Ruben Enikolopov and Ekaterina Zhuravskaya (2007), "Decentralization and political institutions", Journal of Public Economics, vol. 91, issue 11-12, pages 2261-2290.
This paper provides case-study evidence and formal test using country-level data of Riker’s hypothesis about the importance of political centralization for economic decentralization.

Hongbin Cai and Daniel Treisman (2004), "State corroding federalism", Journal of Public Economics, vol. 88, issue 3-4, pages 819-843.
This paper is an example of how federalism can be very costly.

Guriev, Sergei M., Yakovlev, Evgeny and Zhuravskaya, Ekaterina V., (2008), "Interest Group Politics in a Federation".
Available at SSRN: http://ssrn.com/abstract=983883
This paper provides an example of an alternative mechanism for making federalism work to political centralization.