Since the days of Montesquieu and Jefferson, political decentralization has been seen as a force for better government and economic performance. It is thought to bring government 'closer to the people', nurture civic virtue, protect liberty, exploit local information, stimulate policy innovation, and alleviate ethnic tensions. Inspired by such arguments, and generously funded by the major development agencies, countries across the globe have been racing to devolve power to local governments. This book re-examines the arguments that underlie the modern faith in decentralization. Using logical analysis and formal modeling, and appealing to numerous examples, it shows that most are based on vague intuitions or partial views that do not withstand scrutiny. A review of empirical studies of decentralization finds these as inconclusive and mutually contradictory as the theories they set out to test.

Examines the most influential arguments about the consequences of political decentralization and challenges the conventional wisdom that decentralization improves government and economic performance. It will be relevant to political scientists and economists concerned with political economy and political institutions as well as governments and development agencies around the world.

1. Introduction; 2. The political process; 3. Administrative efficiency; 4. Competition among governments; 5. Fiscal policy and redistribution; 6. Fiscal coordination and incentives; 7. Citizens and government; 8. Checks, balances, and freedom; 9. Acquiring and using knowledge; 10. Ethnic conflict and secession; 11. Data to the rescue?; 12. Conclusion: rethinking decentralization.