_On_ **_the_** _Dangers of Decentralizition 11_ supply of services for which kickbacks are higher rather than to those for which there is a demand. It is also costly in terms of production efficiency because it leads to corruption-avoiding strategies that increase costs, favor ineffec' ve technologies, and waste time.

2.18 Corruption is hard to assess and measure, but several reasons can be given for greater corruption at the local level than at the national level. On one hand, more opportunities for corruption probably exist at the local level. Local politicians and bureaucrats are likely to be more subject to pressing demands from local interest groups (whose money and votes count) in matters such as taxation or authorizations. They also usually have more discretion than national decisionmakers. In fact, this discretion is the major theoretical advantage of decentralization. That national bureaucrats, at least in some countries, are moved from place to place makes it more difficult for them to establish unethical relationships with local interest groups, unlike local bureaucrats who make their careers in the same location.

2.19 On the other hand, fewer obstacles to corrmption exist at the local level !Dtion i in many cases requires the cooperation of both politicians and bureaucrats, and the disti. ui between them is generally less rigorous at the local level. Local bureaucrats have less indep.,A.tc_ c ce:tive to local politicians than national bureaucrats do relative to national politicians. In sor. -.tries at least, national bureaucracies have a tradition of honesty which is often absent at **_t.e_** _-, -a1_ level. Monitoring and auditing are usually better developed at the national level than at the loca. ke, . The pressure of the media would also be greater for national corruption than for local corruption.

2.20 Few, if any, empirical studies have been done on the matter. Prud'homme (1992), found informal taxation (defined as the "nonformal means utilized to finance the provision of public goods and services") at the local level in Zaire to be at least eight times more important than the formal taxation recorded in the books of local governments. Informal taxation includes pinch, extortions and requisitions (public informal taxes), but also contributions, gifts and donations (private informal taxes). The study did not attempt to estimate similar figures for national informal taxation, but they would probably not have the same relative magnitude. This study supports the idea that more corruption exists at the local level than at the national level. Widespread agreement could be found in France or in Italy that local level corruption is more significant than national level corruption. Virtually all the cases of corruption that have been identified in these countries in recent years are local-government related. For the reasons suggested, locally elected politicians, in cooperation with politically appointed local bureaucrats, found it easy to extract money for granting local authorizations or of local procurement contracts.

2.21 The issue of corruption only reinforces the point that, from an efficiency viewpoint, decentralization is not always beneficial and that it can be dangerous. These a priori considerations should be supported by empirical studies of decentralization or centralization experiences. One such study, on water collection and treatment in Tunisia, can be found in Khellaf (1992).

# A **Case Study of Centralization in Tunisia**

2.22 Sewage services in Tunisia provide a successful example of centralization. Until 1974, used water collection and treatment was the responsibility of local governments. The level of technical expertise was very low. In 1974, a sample survey of people employed in the sector revealed that only about 4 percent of them had any skills related to sewage, and practically all of