capacity, merit-based recruitment of service providers, and the ability hold staff to account, is perhaps even more important in improving outcomes. The reason these issues are not taken up, and as will be elaborated later, is that local governments in Pakistan have very limited authority over these staff. The paper also does not discuss social outcomes as these are very difficult to attribute solely to the actions of any one particular tier of government.

The paper is structured as follows: The next section provides the theoretical framework for the link between decentralization and service delivery. Section III briefly describes Pakistan’s local government system, focusing on the political, fiscal, and administrative aspects of decentralization. Section IV examines the question of political accountability of local governments in Pakistan, looking at both direct citizen contacting as well as electoral accountability. Section V, which is the core of the paper, addresses the issue of service delivery by analyzing the sectoral composition of development expenditures, the average size and type of typical local development schemes, and trends in non-salary recurrent expenditure to estimate the emphasis on operations and maintenance as opposed to new investments. This expenditure analysis is limited to the province of Punjab, as this is the only province where local governments exercise a significant degree of discretion over the resources at their disposal. Section VI concludes with some policy implications.

# **II. Theoretical framework**

The evidence on the impact of decentralization on service delivery is mixed. Some studies, such as Faguet (2001) on Bolivia, demonstrate that decentralization resulted in a huge shift in public spending in favor of smaller and poorer municipalities. Bardhan and Mookherjee (2004), show that inter-village allocations of credit, resources for local infrastructure and employment for the poor, and development grants from upper levels of government in the Indian state of West Bengal exhibited poorer targeting than allocations of these resources within villages by local governments. Other studies argue that decentralization increased elite capture and **Figure 1: A framework for decentralized service** corruption. A World Bank study of village **<u>delivery</u>** governments established in Indonesia in National policymakers 1979 showed that accountability of village heads to the villagers was very weak, with a negligible number of village proposals Local policymakers included in district budgets (World Bank 2001). A cross-country investigation by Triesman (2002) found that decentralization was significantly associated with measures Poor people Providers of corruption.

_Source_ : Ahmad et al (2004) The reason for this mixed record is, as argued in Ahmad et al (2004), that improvements in public service delivery require three strong relationships of accountability between the different actors in the service delivery chain. These actors are illustrated in Figure 1. First, poor people must be able to hold policy-makers accountable; second policy-makers must be able to hold service providers accountable; and third the inter-governmental framework between national and local policy-makers must be conducive to improving service delivery. The authors refer to these relationships as the ‘long-route of accountability’ as opposed to the short route under which in a private, competitive market poor people, as customers, could hold providers directly accountable. Weaknesses in public servicedelivery can be attributed to breakdowns in any one or all of these links.

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