the institutions of decentralization, or analyze the impact of available and operational institutions.

In the following three sections we consider each political market imperfection in turn, and whether these are likely to be more prevalent for centrally elected rather than locally elected governments. The general answer is, of course, that “it depends”, and the objective of the analysis is to begin to list on what this depends.

# **3.1 Information, Participation, and Monitoring**

Voters may be better informed about the quality and availability of local public goods because of greater physical proximity, or more focused on using this information in voting decisions because of the narrower range of responsibilities for which to hold their representatives responsible. There are two ideas here, one that information is easier to come by at local levels, and that participation and monitoring by voters is less costly. The other is that if voters care about multiple issues a sub-set of which is decentralized to local levels, then they will be better able to hold each tier of government accountable for their respective responsibilities. For example, if voters care deeply about both education and national defense, national government decision makers can more easily remain in office by doing well on the latter and under-performing on the former. Decentralizing responsibility for education to a lower level government allows voters to hold one set of officials strictly accountable for education and the upper tier strictly accountable for defense.

However, because of historically high degrees of centralization of resources , both public and private, there might not be regular or straightforward channels of information transmission at local levels. For example, information with regard to local policies may be of poorer quality if national newspapers, covering only national issues, are the main source of information for voters. Voters might be more apathetic to participation in local elections, perhaps because of poor media coverage and because they perceive that the bulk of the power and capacity to get things done reside with higher tiers of government. If local expenditures are financed entirely out of grants from higher tiers of governments and not out of local tax bases (as is the case in most developing countries), local voters may have little or no information regarding the resource envelope available to their local government and what those resources are intended to provide.

There is very little data on political participation by households in developing countries so there is very little evidence on relative participation by citizens in local and national politics. Khemani (2001) finds evidence that Indian voters use more information in evaluating governments in state elections than they do in national elections. But, of course, states in India are large enough to be countries in their own right, so it is not clear how much this evidence tells us about real decentralization to local governments. Chhibber, Shastri, and Sisson (2003) surveyed voters in India and asked which tier of government they held responsible for the public goods they cared most about—medical facilities, drinking water, roads, education. The state governments were indicated as the most responsible agent by the majority of respondents, although locally elected village governments were also indicated as having significant responsibility for these public goods. This evidence suggests that the mere creation of locally elected governments does not ensure that citizens will hold local representatives responsible for public services.

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