15 odds of meeting the MDGs? Will the urban or the rural poor benefit more from the concern for meeting the MDGs? Where is the poverty reduction or MDG payoff from an additional dollar of investment the highest: in highly dispersed rural populations or in highly concentrated urban or periurban populations? There are clear tradeoffs depending on the cost of technology (low unit costs in rural areas versus low average costs from economies of scale in urban areas). The odds suggest that, in the absence of a disaggregation between rural and urban needs across the MDGs, cost-effectiveness in achieving them may imply that rural poverty reduction will not get the priority it deserves. On the other hand, the focus on the MDGs may hurt the urban poor in a different way. The distinction between the persistently and transiently poor is quite relevant in practice but not equally relevant to the urban versus rural poor. Yet the MDGs do not make this distinction and tend to focus on the persistently poor, which favors the rural poor. This implies that strategies designed to accelerate growth to achieve the desired reduction in an overall index of poverty may be better than those that benefit the persistently poor (Gaiha 2003).

# **5. Decentralization (and participation)**

Decentralization has many definitions in the economic literature, as it does in the real world. Most of these refer to administrative or political changes that give subnational governments more authority or responsibility in delivering public services. Since the 1970s many countries— particularly developing countries—have seen a major increase in decentralization. There is a tremendous amount of economic research on the topic in general, but an amazingly modest amount in terms of its implications for infrastructure. That does not mean that the international community knows nothing about how decentralization affects infrastructure. In fact, there is a lot of useful institutional information on the forms of decentralization around the world and on the various ways that subnational governments organize themselves to finance and deliver local public services (see, for instance, Serageldin and others 2000).

But there is not much empirical evidence on the relative efficiency of the various delivery modes and types for infrastructure, especially in developing countries (see Shah and others 2004 for a recent survey).<sup>18</sup> In a volume of background papers to the World Bank’s _World Development Report 1994_ , on infrastructure, Estache (1995) started this line of empirical research on the levels and effects of infrastructure decentralization. In that volume, Estache and Sinha (1995) show that for a sample of 10 industrial and 10 developing countries, decentralization tends to increase total and subnational spending on infrastructure much more in developing than in industrial countries. This different response has been confirmed by other empirical studies (again, see Shah and others 2004 for a survey). Similarly, the increased demand for infrastructure services caused by decentralization has been confirmed by Faguet (2003). He shows that in Bolivia decentralization has led to rerankings of investment programs in favor of agriculture, education, and water and sanitation.

> 17 The original baseline poverty estimates used for the MDGs were based on income and consumption distribution surveys for 44 countries containing 71 percent of the population in 1990 (Ghaiha 2003). These countries accounted for about a quarter of those considered to be developing. Ghaiha also documents the many sources of data and their inconsistencies.

> 18 There is a large public administration literature documenting the impacts of various forms of public service decentralization in developing countries. There is also quite a bit of analysis of decentralized health and education services, recently reviewed in the World Bank’s _World Development Report 2003_ .